Donald Trump delivers a speech during the evening session on the fourth day of the Republican National Convention on July 21, 2016 at the Quicken Loans Arena in Cleveland, Ohio. (John Moore/Getty Images)

No matter the outcome, this much is clear: on Nov. 8, Americans will elect a president that the majority of Americans dislike. It’s not just the usual cross-party disenchantment—large swaths of the Democratic base have mixed and tepid feelings for Hillary Clinton, and all sorts of Republicans are appalled Donald Trump carries their Grand Old Party standard. Seldom have the connective tissues between party and party candidate been so frail. Ahead of their discussion at the Lind Initiative series on U.S. politics at the University of British Columbia, we spoke to leading voices on America’s uneasy right and restless left. David Frum is a former George W. Bush speechwriter and a fellow at the neo-conservative American Enterprise Institute. Peter Beinart is former editor of The New Republic, a liberal magazine. Both currently write for The Atlantic.

David Frum on the disconnect on the right that gave rise to Trump

Q: What’s it like being an anti-Trump Republican these days?

A: It’s certainly a disorienting experience. One of the questions I often get asked is, “Were you surprised that Trump won?” I always answer the same way: “I was surprised, I am surprised and I will never stop being surprised.”

Q: Why? Because Trump is so unlike a Republican?

A: It’s the sheer improbability of it. He’s not just unlike a Republican, he’s unlike a presidential candidate. The whole elaborate presidential process is designed to screen out people like Donald Trump. And that process broke down in ways quite unlike anything in the recent experience of the United States. Maybe unlike anything in any of the history of the United States.

Q: You once wrote that Trump’s nomination was an “opportunistic infection” of a sick Republican Party.

A: The system has evolved to protect parties from people like Donald Trump. It really is true that people without well-established public records, without proven capability in public service, without tested beliefs and at least apparently under the influence of a foreign power, such people are screened out by major parties.

Henry Wallace was Franklin Roosevelt’s vice-president in his second to last term. Henry Wallace’s pro-Soviet sympathies became more and more obvious and Roosevelt’s health was failing. So the Democratic Party in 1944 removed Henry Wallace as vice-president and put in Harry Truman instead because they sensed it was quite likely that Roosevelt would die in the next term and they were not going to let Henry Wallace become president of the United States.

So that’s how the system works.

Q: How did it break down in such an extreme way with Trump?

A: In early 2015, as the Republican field took form, there were ultimately 16 candidates of whom at least half were reasonably serious, reasonably well known, reasonably well funded. Most of them, except maybe Ben Carson, converged on some very similar answers to the problems of the country. They had endorsed Paul Ryan’s economic plan of big tax cuts and big entitlement cuts. They had accepted the 2013 autopsy that said all of the Republican Party’s problems could be explained by the fact that it didn’t support a permissive enough immigration policy.

So you had a party whose members wanted more secure health care, less immigration, fewer wars and no more Bushes. And what the party was offering them was less secure health care, twice as much immigration, more wars and another Bush. No wonder there was a mutiny.

Q: That’s a party that seems to be in a tortured state. Which side there represents the true Republican Party?

A: Trump got the largest group of Republican voters by promising that he would protect Medicare, protect Social Security, do something about wages—and that’s not just a working-class problem, wages have stalled for the lower 80 per cent of the population, not just the lower third—and he would restrain immigration.

The heart-rending tragedy in all this is there were elements in Trump’s message that need to be heard, to the extent that he has stances on the issues. Many of his stances are wise—if they were articulated by somebody else. The answers are being offered by someone who is completely irresponsible and dangerously ignorant and hostile to the constitutional system of the United States.

Q: Was there a political savvy in Trump or did he just stumble onto this?

A: How it happened I don’t know. But Donald Trump, as a businessman, he’s not much of a builder and he’s not much of dealmaker and he certainly isn’t very good at making expenses line up with income. But he is a marketing genius. He must have seen an empty market niche that no one but him filled.

Q: In Canada there is a not-uncommon view that these people are mainly dumb white people.

A: Canadians are going to have a hard time understanding American politics right now for two reasons. Reason one: over the past decade and a half the developed country on Earth where the middle class has done best is Canada. The United States is toward the bottom of those 25 or so developed countries in the OECD for how its middle class has done.

So right off the bat, Canadians aren’t going to get it. The Canadian middle class is under less pressure than any other middle class in any developed country on the planet. So they feel good. They feel optimistic. They feel secure.

The second gap is the Canadian experience with immigration has been dramatically more successful than the American experience. Immigrants to Canada are highly skilled, highly educated. They come from many different countries, so they rapidly assimilate to English or French. They intermarry rapidly. They are way less likely to commit crimes than the native-born. They are crucial to the growth of the economy and technological innovation. And so Canadians say, “What’s the problem?”

The Americans have very different experiences with both those things. And so their politics are a lot more frantic and hard-edged and insecure than Canadian politics are.

Q: Looking at Trump’s supporters, what defines them beyond their maleness, whiteness and lack of education?

A: Donald Trump supporters, it should be stressed, are more affluent and more educated than the typical American. They are less affluent and less educated than the typical Republican.

Everyone is rightly praising a wonderful book called Hillbilly Elegy, about the really hard-pressed people of Appalachia. Those people have dropped out [of the political process]. The typical Trump primary voter was a high-status man in a low-status place—more economically anxious than economically insecure. They might be for trade protection but they are not union people.

Q: What do you think will happen on Nov. 8, and what will become of the Republican Party?

A: In the probable event that Trump loses, Republicans will descend into a fierce and multi-sided debate over what went wrong and what to do next. There will be Trump loyalists. There will be self-described true conservatives who will insist that nothing is wrong with the party that a more purist ideology cannot fix. The K Street/Chamber of Commerce Republicans will very likely insist that what is good for them—tax cuts and cheap labour—is the path to political salvation for the party.

My own hope is that the party will be able to sift through the wreckage and rescue the important truths Trump stumbled over—that Republicans also care about health coverage; that the U.S. today needs less immigration, not more—from the disaster that is Donald Trump the man and candidate.

Q: Could the party recover for the next election, or eight years from now?

A: I can’t predict how long. Frankly, I thought the two defeats of 2008 and 2012 would be lesson enough about the need for [the Republican Party] to reinvent itself as a culturally modern and economically inclusive party of the centre right.

Q: Have you ever considered abandoning the Republican Party?

A: We all have crazy thoughts in the middle of the night.

Hillary Clinton hugs U.S. President Barack Obama as she arrives onstage at the end of his speech on the third night of the 2016 Democratic National Convention in Philadelphia, Pennsylvania, U.S., July 27, 2016. (Jim Young/Reuters)

Peter Beinart on the challenges Clinton faces from the left

Q: You call the Democrats the more conservative of the two parties—that Clinton has pledged no policy changes to significantly shake up domestic or foreign affairs. What, if anything, makes you enthusiastic or encouraged by a Clinton presidency?

A: I don’t find Hillary Clinton all that personally inspiring. I found the figure of Barack Obama inspiring, just as the guy on my television screen every day. I don’t feel that as much about Hillary Clinton, although obviously having a female president is a tremendous milestone. Where the opportunity comes with Hillary Clinton is that she will be able to move the Supreme Court. The potential of appointing a couple of Supreme Court justices, or maybe even three, means you could have a liberal majority on the Supreme Court, which we have not had since I was a child. That will only be possible if she wins. If the Democrats have big victories in Congress—and because of the position the Republican Party will end up being in after this—there may be an opportunity to do some really valuable things. Especially, I think, about infrastructure. Because the infrastructure in the U.S. is lousy, and because you can borrow money so cheaply, and Trump himself supported infrastructure spending. Maybe you could get a big infrastructure plan through.

Q: I almost feel like you answered if my question was: What would excite you about a generic Democrat winning? I wonder if that says something about how one feels about Clinton.

A: She’s a very capable, conscientious person. I think she cares very deeply about policy. She knows a lot about how the government works, and I think those things are very important. You don’t really appreciate those things until you get a guy like George W. Bush in the White House, and then you realize that when you don’t have someone who knows or cares about government policy, a lot of bad stuff can happen. The path that she’s charting is by necessity—and understandably so—a continuation and a little bit of an acceleration of the path that we’ve already seen under Barack Obama.

Q: How is she an acceleration of Barack Obama?

A: She’s an acceleration because the terms of the debate have moved left. You can certainly see that on an issue like criminal justice reform. You can see it on immigration, where she doesn’t really even have to pay lip service to the idea of the deportations that he did. You can see it on the debate on Wall Street. Not on foreign policy—the political currents will probably push her to be a little more hawkish than Obama. On domestic policy, one of the major stories in American politics has been the growing ideological and political self-confidence of the Democratic Party, and the growing ideological and political pessimism of the Republican Party.

Q: She had to pivot left for Sanders. Should she be doing anything more to respond to Trump?

A: There would be no purpose for her really to pivot to the centre on issues of criminal justice, in an environment where there’s not that many swing voters and you need African-American turnout. I think that this is part of the confidence that exists in the Democratic Party today, is that I don’t think there’s the same feeling of a need to pivot to the centre in the way there was a decade or two decades ago.

Q: Will the insurgent wing of the Democratic Party be happy with a Clinton presidency?

A: They’ll challenge her a lot from the left. There’s more of a left to challenge her than there was under Barack Obama. Black Lives Matter wasn’t there, Elizabeth Warren wasn’t there, Bernie Sanders wasn’t the Bernie Sanders of today. I think that they will be more effective in moving her politically, partly I think because the Democratic Party is bigger and stronger, and also Obama came in with this idea that he could do a lot of stuff in a bipartisan way. My guess will be that Hillary Clinton won’t necessarily think as much in those terms.

Q: According to a Gallup poll in August, only 56 per cent of Democrats are happy Clinton is the nominee. If that’s the case, and Trump voters dislike her so intensely, what does that mean for how a Clinton presidency will be received?

A: In part, it depends on the economy, if the recovery really starts to translate to people in a way it hasn’t yet. That will really boost her popularity regardless of personal stuff. I do believe that her gender weighs heavily on public perception of her. There’s a ton of academic literature that shows people are much more critical of female leaders than they are of male leaders. They’re much less tolerant of female ambition, much more threatened by female power. I don’t think you can explain Hillary Clinton’s level of unpopularity, which is epic, among white men—much higher levels of unpopularity than we saw with Obama in 2008 or John Kerry in 2004—without basically a heavy dollop of public hostility to the idea of a woman in that kind of position.

Q: A lot can happen in the next couple of months. How does the left respond or reorganize in response to a Trump presidency?

A: Oh gosh. I don’t even really know how to think about it. I’m thinking of analogies maybe I shouldn’t use. But it’s kind of like a politically unthinkable event. It’s almost like saying how is the Tory party going to respond to a pro-Brexit vote? It was a leap into the dark. What you could say is the Democrats would be in militant opposition to Trump. What you would see would be some kind of efforts to restrain Trump’s power, and to try to enforce the norms of the relationship between the president and the other branches of government that could constrain what the president could do. There would be a lot of people looking to the Supreme Court, and to the military, and to Congress, in order to try to kind of box Trump in and prevent him from doing really dangerous stuff.

Q: The military! Are we talking Turkey here?

A: Not a coup, but the military always pushes back. People in the military said they would not follow an order to torture. They pushed back against Obama when Obama wanted to withdraw troops from Afghanistan in 2009. They pushed back hard against Bill Clinton, effectively, when he wanted to have gays in the military in 1993. I think there will be public support and elite support for the military trying to basically constrain Trump, to pressure him into not doing crazy things about American nuclear policy or NATO. It might end up being that Trump, because he doesn’t understand how to be president at all, you have a situation like you did under [George W.] Bush, where you have experienced people like [Dick] Cheney and [Donald] Rumsfeld who end up wielding a lot of influence. People on the left will be in a period of unprecedented trauma. Not only people on the left.

]]>http://www.macleans.ca/politics/how-populism-is-pulling-americas-parties-apart/feed/13Strombo night in Canadahttp://www.macleans.ca/culture/television/strombo-night-in-canada/
http://www.macleans.ca/culture/television/strombo-night-in-canada/#commentsFri, 14 Mar 2014 13:11:33 +0000http://www.macleans.ca/?p=523005How George Stroumboulopoulos plans to win over hockey fans and change the way they watch the game

It’s not often Don Cherry gets overshadowed in the wardrobe department. But that’s what happened this week when he shared the stage with the unexpected new face of Hockey Night in Canada, George Stroumboulopoulos. Cherry, surprisingly, was dressed in a relatively tasteful black suit and white shirt. Stroumboulopoulos, or Strombo, as he’s called, wore an open-necked black shirt, tight-fitting black pants and a pair of pre-distressed brown leather wingtips. His trademark earrings dangled from his ears, a skull ring on his finger glinted under the camera lights.

Stroumboulopoulos, who will host Hockey Night in Canada (HNIC) beginning in October, joked about the need to “dress for the set” (he was scheduled to tape his TV show George Stroumboulopoulos Tonight immediately after the press conference), but it would be a mistake to assume his new bosses at Rogers Communications Inc. expect him to be your typical, shiny-suit-wearing sports host when he shows up for work in the fall. Instead, the communications giant, which is taking control of CBC’s flagship hockey program as part of its massive $5.2-billion NHL rights deal, is hoping Strombo will help guide its hockey coverage in a unique, new direction, helping to draw in more women, new Canadians and casual hockey fans in the process. “There’s a lot of people on Twitter saying, ‘Oh, eff that guy,’ because I don’t approach this as a straight-up sports gig,” Stroumboulopoulos says. “But no one out there can out-sports-fan me.”

In addition to hosting the main HNIC Saturday night broadcast, Stroumboulopoulos will also be the studio anchor for a new Sunday night show called NHL Hometown Hockey on Rogers-owned City. He will also appear on other NHL-related broadcasts on Rogers’s Sportsnet channel. While the 80-year-old Cherry will still be there in all his floral-print glory on Coach’s Corner, along with Ron MacLean, it is Strombo, a Gen-X vegan with a passion for indie music and motorcycles, that most Canadians will see when they turn on their TV (or tablet or iPhone).

It’s a big gamble—almost as big as the one Rogers took when it signed the 12-year broadcasting agreement with the NHL last November. With the stroke of the pen, Rogers (which owns Maclean’s) cornered the market on national NHL broadcasts in Canada, and now Strombo is the one who will carry the weight of that deal—a tall order for a former MuchMusic veejay who figured his CBC talk show was winding down and made a failed attempt at launching a show on CNN last year. He has none of the traditional hockey broadcaster bona fides—ex-player, ex-coach—other than his passion for the game and congenial on-air personality.

Rogers top brass is acutely aware of the dangers of too much change, too fast. They struck a four-year sharing agreement to keep HNIC on CBC and Cherry and MacLean in the mix, albeit with a reduced role for MacLean. Nevertheless, there’s been a growing sense that HNIC’s best days are behind it. Its narrow focus on talking-head panel segments and insider gossip appeal mostly to hard-core viewers.

Strombo—who can’t help but talk about hockey in a way that infuses the game with all sorts of extra meaning, ranging from cultural to political—is the outsider that Rogers hopes will shake up hockey broadcasting in Canada. While he says his family never had the money for him to play in an organized league, he talks fondly of games of street hockey with phone books for goalie pads and a few years on the high school curling squad, where he wore skinny jeans, a skinny tie and taped the soles of his Dr. Martens boots so they would slide across the ice. But since most kids eventually have to pick a clique, he says he ultimately drifted toward bands and music. “I think it’s going to be funny for those kids who, like you and I, had to make these choices,” he says. “Now they will look at me and say, ‘Well, I guess we don’t have to anymore. Now there’s a Metallica fan who’s hosting Hockey Night In Canada.’ ”

News of Strombo’s appointment may have come as a shock to many, but it was a move long in the making. His name first surfaced six years ago, when the then-head of CBC Sports, Scott Moore, met Strombo for coffee and talked about him playing a role at HNIC. Later, Moore tried to bring him on board for CBC’s Beijing Olympic coverage in 2008, but the scheduling didn’t work. “He’s incredibly bright, a great broadcaster and had some terrific ideas,” recalls Moore, now the president of Sportsnet and NHL at Rogers.

After Rogers struck its deal with the NHL, a small group, including Moore and Keith Pelley, the president of Rogers Media, gathered at a cottage outside Toronto. “We started talking about what we wanted to do to change things up a bit and put a fresh look on the program—not just HNIC but Sportnset as well. His name came up and we all thought, ‘Well that’d be interesting.’ ” Just before the Sochi Olympics, a plan for how to use Strombo, MacLean and Cherry had begun to take shape.

Strombo is among the first to admit that it may take die-hard hockey viewers a while to get used to seeing him on their favourite program. He’s not exactly the jock type. After his current show wraps, he is planning to head down south on his motorcycle, where he will camp or stay in motels and likely take in a concert or rave along the way.

It just goes to show there’s no generally accepted path to the centre of Canada’s hockey universe. MacLean, for example, was a Red Deer, Alta., radio DJ and occasional weatherman before he got his big break replacing Dave Hodge on the broadcast. He was in his mid-20s at the time. By contrast, Strombo comes to HNIC at age 41, with two decades of experience under his belt. And even then, he’s only half the age of Cherry.

Ron MacLean (left) sits alongside Don Cherry as Rogers TV unveils its team for the station’s NHL coverage in Toronto on March 10, 2014.

Of course, that didn’t make the announcement any less surprising. Even long-time host MacLean said he was caught off guard when the news first broke on Twitter Sunday. “When you wake up and see ‘Strombo Night in Canada,’ you’re like ‘Wait a minute,’ ” he said. “So yeah, I’m human.” Along with Coach’s Corner, MacLean will host a segment on Hometown Hockey that will be broadcast from a different small Canadian town each week. Keeping MacLean (and Cherry) was part of the plan from day one, says Moore. And when the idea for the Hometown segment ﬁrst emerged, it seemed ideal for MacLean. “I genuinely think Sunday night in a small town in Canada with the NHL backdrop is a good idea,” says MacLean.

It’s no secret that the relationship between the NHL and Hockey Night in Canada under the CBC had become rocky in recent years. That was never more evident than during MacLean’s confrontational interviews with NHL commissioner Gary Bettman—the last of which happened in 2010, when MacLean grilled him about franchise values. (“We’re watching a wonderful game and you just want to tick off franchise after franchise?” said an annoyed Bettman.) “The pressure on me to back off, toe the company line and be a good marketing arm of the NHL is incredible,” he told Maclean’s Jonathon Gatehouse, in the writer’s book on Bettman, The Instigator. MacLean recalled once running into Bettman off-camera. “He walked right up to me and said, ‘You know, I’m the only reason you have a job.’ And he gave me a crocodile smile.”

When asked whether he thought his run-ins with Bettman may have played a role in Rogers’s decision to bring in new blood, MacLean deflects by saying, “That’s a question for Gary”—but notes that Bettman would have had some say in what Rogers does with the HNIC brand.

Either way, the new Sunday night spot featuring MacLean will only be one corner of Rogers’s new hockey broadcasting empire in Canada. The options for watching the NHL will jump exponentially under the new rights deal. In addition to the Saturday and Sunday night broadcasts, Daren Millard will host a Wednesday night show while Jeff Marek hosts another one on Thursdays. Games will also be made available over the web through NHL Centre Ice, streamed to subscribers’ computers, tablets and smartphones. If there’s a game on, it will be playing somewhere in the Rogers universe.

If HNIC is the crown jewel of Canadian hockey, it is also somewhat tarnished. In 2008 it suffered the humiliating loss of its theme song, outbid for the rights by CTV. It has been stalled in the ratings, with as few as 600,000 viewers tuning in to Coach’s Corner midway through last season, as the Globe and Mail reported last year. And it’s pro-Toronto Maple Leafs bias has, for years, grated on fans living outside southern Ontario and become a source of increasing frustration for other Canadian clubs.

Critics say Hockey Night in Canada has become overly reliant on filling intermissions with business and insider gossip. It’s a criticism that could be levelled at a lot of pro-sports coverage. That kind of content is cheap to produce, says Ralph Mellanby, a former executive producer who worked on the show for over 20 years (and hired Cherry). But, he adds, that focus sucks the life out of what makes sports so entertaining: the stories, the characters and the drama. He calls HNIC a “very tired talk, talk, talk show.” Moore says changes are in store, with more focus on the stars of the game. “We want to put the fan back at the centre of the show. I want to see less and hear less about salary caps and NHLPA escrow—and more about why Alex Ovechkin didn’t play well leading into the Olympics or where is Steve Stamkos going to play when he becomes a free agent and what effect that will have on the fans.”

Stroumboulopoulos seems to identify some of the same problems. Just like he feels Canada is ready for a HNIC host who likes going to hip-hop concerts, he believes the country is ready to stop treating its favourite sports heroes like one-dimensional beings who do nothing but give 110 per cent on command. “I think hockey has limited what players have been able to do,” he says. “I think we’ve spent a lot of time in Canada beating the personality out of players. Anytime they have personality, the press generally jumps on them.” Now, thanks to social media, he argues that fans can, for the first time ever, interact directly with their favourite players, and that HNIC needs to reflect that change. “I want to create a space where we’re open to a player being a human being, first of all, but where they can also be interesting and funny and outspoken. My job is not to run a dressing room; that’s the coach’s job. My job is to connect people to the players they love, and there’s lots of ways we can do that. I know a lot of these players are interested in that next step of their development. So we on this broadcast want to create this type of space.”

What’s not yet clear, however, is how exactly Strombo will create the kind of hockey-as-culture he relishes. While he says, Rogers “literally just wanted me to be me,” a hockey discussion with Strombo quickly has a way of morphing into something much bigger and more weighty. Consider his description of growing up in Toronto with hockey in the 1980s: “The Quebec Nordiques were playing, there was a another referendum coming down the pike, Mulroney has his majority, but he was a prime minister from Quebec. Then there was this Western alienation and the rise of the Oilers and the rivalry between the Flames and Canucks.” Hockey fans may not know what hit them.

Ellin Bessner, a journalism professor at Toronto’s Centennial College, is among those who believe Strombo will be a good fit for the program, although she says her hockey-crazed 16-year-old son’s reaction to the news was that it would be “weird” at first. She says Strombo’s popularity among women should help draw in more female fans, which is long overdue given the rising popularity of women’s hockey in Canada. Bessner also says his skills as an interviewer should go a long way to improving the quality of player interviews on the show. While she calls his style unorthodox—he slouches, crosses his legs and talks too much—she nevertheless considers him one of the best in the business because he does so much research on his subjects. “He does things that get people out of their comfort zones,” she says. “All these people come through with their movie promotions and have been interviewed a million times, and George finds out things about them that make them say, ‘Hey, how did you know that?’ ”

Strombo is a lot more familiar with the NHL than many viewers probably realize. While he often professes his love for the Habs on air, those who have worked with him at the CBC say they are frequently amazed by how deep his passion for the game extends, including the finer points of trade deals and the NHL draft. He took the rare step of actually learning how to skate in his 30s and has played some ice hockey in the Exclaim! Cup, a tournament that consists of teams made up largely of musicians and artists. “I suck. I’m terrible—I’m the worst player in the tournament,” he told an interviewer from Eye Weekly in 2006. (Those who’ve shared the ice with him say Strombo is not just being modest, but that everyone enjoys playing with him nonetheless.) Nor is he a completely unfamiliar face to the NHL, having been a presenter several times at the annual NHL Awards in Las Vegas.

Most importantly, he is smart enough to recognize that, regardless of what he brings to the table, he is not going to be the only star anymore. “As much as I appreciate being a part of it, and the attention around it, I know as well as anybody who is a host that you really have to drive the attention toward something else,” he says. “When the puck drops, that’s all that matters.”

It’s an approach that MacLean, a man who could be lacing up his skates for his final four years on HNIC, seems to agree with, despite his high-profile battles with Bettman over the years. For all the hype and importance placed on the NHL’s signature broadcast and the people who deliver it, he says that, for the most part, his on-camera job for the past quarter-century has been relatively straightforward, if not exactly easy. “I work really hard to create new ideas to say the same thing: Tonight’s a big game,” he says. “Maybe this will be what keeps it fresh.”

Good news

Power to the people

The Harper government unveiled a retooled First Nations education plan this week that will see Aboriginal communities oversee their own schooling. Central to the plan will be the inclusion of traditional culture in the curriculum, as well as standards consistent with off-reserve education in the provinces; in other words, a much-needed marriage between Aboriginal heritage and mainstream practicality. The Prime Minister also promised an additional $1.9 billion for Aboriginal education. It’s an important, overdue first step in empowering First Nations to take control of what for too long has been a crippling crisis.

Young and generous

The rich may be getting richer, but also more charitable. The 50 biggest donors in America last year gave a combined $7.7 billion, the most since 2008, according to the Chronicle of Philanthropy. Most impressive is who topped the list: Facebook founder Mark Zuckerberg and his wife, Priscilla Chan, who gave nearly $1 billion to the Silicon Valley Community Foundation (SVCF). With Zuckerberg’s donation, the SVCF raised a total of $1.4 billion in 2013. Philanthropy has long been the domain of old money, so it’s a welcome shift to see the under-30 tech crowd not just playing a bigger role in giving, but leading the way.

We have the technology

The bionic man is two steps closer to reality this week. Thanks to a new breed of prosthetics that connects directly to an amputee’s nervous system, 36-year-old Dennis Sorensen of Denmark was able to experience the sensation of touch for the first time since he lost his left hand in an accident nine years ago. In other miraculous sci-fi news, surgeons at the University of Michigan completed the first FDA-approved “bionic eye” transplants, enabling patients with degenerative eye disease to see light and shapes.

Nuggets of truth

Honesty is the best advertisement. Just ask McDonald’s Canada. The fast food giant earned plenty of kudos this week for releasing a three-minute commercial that takes customers inside a Chicken McNugget factory—which, believe it or not, is strangely appetizing. Meanwhile, the Subway sandwich chain has promised to stop using a bleaching agent in its bread (which is also found in shoes and yoga mats), and Kraft says it will remove artificial preservatives from its most popular cheese slices. Bon appétit.

Bad news

An Israeli police officer clashes with a protester during a demonstration against cuts to seminary students who avoid military service

Ceding the high ground

The Pakistani government opened formal talks with the Taliban last week in what it describes as a “journey for peace” aimed at ending an insurgency that has killed tens of thousands since 2001. While it may seem like the only solution, skeptics say the talks serve to lend the Pakistani Taliban a sense of legitimacy it doesn’t deserve. This is the same group, after all, that said this week it has as many as 500 female suicide bombers in Pakistan ready to act if talks break down. Pakistan should take the position the U.S. does: Don’t negotiate with terrorists; defeat them.

Provincial headaches

It’s hard to decide which province is closer to disaster. Despite its oil and gas boom, Newfoundland and Labrador is bracing for a population plunge, according to the Conference Board of Canada (from 527,000 today to 482,000 in 20 years). Meanwhile, former Quebec premier Jacques Parizeau says la belle province is in dire need of “shock therapy,” citing two recent studies that show its residents pay an excessive amount of tax and have fallen far behind the productivity of other regions. Thank goodness for Alberta.

Mothers know best

The United Arab Emirates passed a law last week requiring mothers to breastfeed their children until they are at least two years old. In Oshawa, Ont., a city councillor is being investigated by the Children’s Aid Society following a complaint that she breastfed her newborn at work. Mothers should be free to breastfeed wherever they need to—or not at all. Yet, time and again, the issue elicits wrong-headed and self-righteous reactions. Pope Francis got it right last month when he told mothers at an event in the Sistine Chapel to breastfeed their children “without thinking twice,” because “they are the most important people here.”

Sea sickness

The U.S. Centers for Disease Control and Prevention said last week it was a new strain of norovirus that made almost 700 people sick on a Caribbean cruise last month. It was the latest in a long list of outbreaks that have battered the cruise industry’s image. Royal Caribbean’s latest gambit may not be the answer to its real problems: It plans to install 80-inch displays in the interior staterooms of its new ship, Navigator of the Seas, to create “virtual balconies.” At least passengers will have something to look at if they’re stuck in their rooms with a stomach bug.

]]>http://www.macleans.ca/news/good-news-bad-news-16/feed/0Econowatch: A scorecard on the state of the economyhttp://www.macleans.ca/economy/business/econowatch-53/
http://www.macleans.ca/economy/business/econowatch-53/#commentsFri, 08 Nov 2013 20:15:00 +0000http://www2.macleans.ca/?p=438475Another overly optimistic prediction from the Bank of Canada

A key qualification for landing a job at the Bank of Canada, it seems, is an unfailing sense of optimism. In 2009, the bank forecast the economy would grow 3.3 per cent in 2011. It grew 2.5 per cent. In 2011, it said the economy would grow 2.9 per cent in 2013. It will likely be just 1.6 per cent. Now it says the economy will grow 2.3 per cent next year. How likely is that? The bank has consistently viewed the economy through rose-coloured glasses in recent years, perhaps believing its low-interest-rate policy will eventually bear fruit. Rates have been held at one per cent for three years now. But the economy seems only to be getting worse.

It grew 0.3 per cent in August, Statistics Canada said last week—mostly attributed to a familiar crutch, the oil business. Elsewhere, things aren’t looking up. A new TD Bank report said corporate Canada is “in a slump,” with profits down 16 per cent from their post-recession peak in 2011. Some observers point out that Canada is still doing better than Europe and Japan. But so are most countries that aren’t in a recession, from South Africa and New Zealand to Equitorial Guinea and Guatemala. After breezing through the recession, Canada is back to old habits: hoping its fortunes (i.e., exports) will rise along with America’s comeback. But the U.S., too, is back in a rut. Last week, the Federal Reserve said it would continue with its $85-billion-a-month bond-buying stimulus program.

With the economy sputtering, Ottawa has meanwhile remained preoccupied with fiscal restraint and balancing the budget within two years. So, with neither low interest rates nor government spending providing a boost, the outcome seems predictable: Official growth forecasts will look nice, but will keep missing the mark.

The Good News

Sales of cars and trucks were up 10 per cent in Canada last month, with sales of pickup trucks leading the way. Honda said it was its best October performance in more than a decade.

America’s annual deficit fell to its lowest point since 2008, due to tax increases and spending cuts. But with more than $17 trillion in debt, it’s too early to celebrate.

The price of raw materials—everything from aluminum to gasoline— declined 1.5 per cent in September, the first drop since April. Canadian manufacturers need all the help they can get.

Amazon says it will start selling groceries and auto parts in Canada. The American retail invasion continues—online.

Tim Hortons is testing a new dark-roast coffee. Could it provide the jolt the economy needs? Nothing else seems to be working.

The Bad News

Consumer confidence took a nosedive following the U.S. government shutdown in October, hitting its lowest point in six months. It’s difficult to ensure the economy is humming when you can’t even keep the lights on.

Ottawa’s wireless policy grows more confusing by the day. Telus is being allowed to buy struggling upstart Public Mobile, but not cash-strapped Mobilicity. No wonder U.S. giant Verizon took a pass on Canada earlier this year.

Sluggish growth means the U.S. Fed will keep emergency interest rates in place and continue buying $85 billion worth of bonds a month. It’s an economic crisis that never seems to end.

Sears Canada is closing five of its stores, including its flagship downtown Toronto location. Meanwhile, in nearby Hamilton, U.S. Steel will permanently cease production at the plant formerly run by Stelco, which was first incorporated in 1910.

The trying economic times are about to become a lot more difficult to swallow. Morgan Stanley says the world is facing a massive wine shortage, with demand outstripping supply by the widest margin in more than 40 years.

Signs of the times

A recent FAA decision will allow tablets and other electronic devices to be used on takeoff and landing on U.S. domestic flights (as long as wireless functions are turned off). Canada is considering similar rule changes. It means one fewer sanctuary from modern life. The upside? A boost in productivity.

The hedge fund run by Wall Street titan Steven A. Cohen is reportedly close to a billion-dollar settlement deal, after the fund was indicted on fraud charges. The landmark fine would likely prevent Cohen from managing other people’s money.

Traders are watching the Fed’s every move for clues as to when it will begin to unwind, or “taper,” its support for the U.S. economy. So, when a deer crashed into a window at a Federal Reserve building in Cincinnati, the Twitterverse lit up with theories, including, “Are deer afraid of tapers, too?”

Barrick Gold, the world’s biggest gold miner, has halted construction on its troubled $8.5-billion Pascua-Lama project in South America. It’s yet another ominous sign for gold bugs, who have suffered a 20 per cent drop in prices so far this year.

By the numbers

$6.66 BlackBerry’s share price on Monday, following news that it is abandoning efforts to sell itself, and that Thorsten Heins will step down as CEO.

28 The percentage of Americans who believe China (not the U.S.) is the world’s dominant economic power, according to a recent poll by The Street.

]]>http://www.macleans.ca/economy/business/econowatch-53/feed/6Shutdown over, when will Janet Yellen dial back the Fed’s easy money policy?http://www.macleans.ca/economy/business/shutdown-over-when-will-janet-yellen-dial-back-the-feds-easy-money-policy/
http://www.macleans.ca/economy/business/shutdown-over-when-will-janet-yellen-dial-back-the-feds-easy-money-policy/#commentsSat, 19 Oct 2013 12:29:13 +0000http://www2.macleans.ca/?p=433106There’s nothing normal about the U.S. economy these days

Before the Great Recession, Alan Greenspan, America’s rock-star central banker, was revered for his ability to move markets with the tone of his voice. But even he would envy the influence of the next Federal Reserve chief. President Obama’s new nominee, Janet Yellen, if confirmed, stands to inherit an increasingly powerful Fed at a historic moment. Her first task will be to address one of the most important and divisive questions facing the country: to taper—and thereby dial back the easy-money policies that have their roots in the Greenspan era—or not to taper?

Critics worry Yellen will continue the Fed’s policy of ultra-low interest rates and its $85-billion-a-month bond-buying stimulus program. As a vice-chair of the Fed, Yellen has been an architect and key supporter of these policies. As her opponents see it, the strategy is stoking inflation and asset bubbles that could ruin the economy. The website NoOnYellen.com, headed by a New York hedge fund manager, labelled her “a threat to the American standard of living.” Canada’s Finance Minister Jim Flaherty urged the U.S. to ditch its stimulus program “as quickly as they can.”

The trouble with the pro-taper argument is that inflation, despite the five years spent pouring trillions into the economy, is almost non-existent. The U.S. Consumer Price Index was up just 0.1 per cent in August. America, as Yellen has argued in the past, has more immediate problems, such as weak job growth. Unemployment has fallen to 7.3 per cent, from 10 per cent in 2009. But that’s far from the four and five per cent that were the norm in decades before the recession. Also missing? Consumer confidence, which, last week, dipped to a nine-month low. Yellen has described it as an important tailwind—“the faith most of us have . . . that recessions are temporary and that the economy will soon get back to normal.”

But there’s nothing normal about the U.S. economy these days. Five years after the recession, growth is barely topping two per cent. Meanwhile, America’s soaring debt has created a whole new crisis. Quantitative easing was a desperate measure for desperate times. Has enough changed to abandon it? Yellen’s answer will likely be no. It will need to happen, but too much evidence suggests now isn’t the right time.

]]>http://www.macleans.ca/economy/business/shutdown-over-when-will-janet-yellen-dial-back-the-feds-easy-money-policy/feed/7Econowatch: A scorecard on the state of the economyhttp://www.macleans.ca/economy/business/econowatch-54/
http://www.macleans.ca/economy/business/econowatch-54/#commentsFri, 04 Oct 2013 20:00:00 +0000http://www2.macleans.ca/?p=428140Apple surpasses Coca-Cola as the most valuable brand

In 2007, Apple launched its first iPhone. This week, it surpassed Coca-Cola as the world’s most valuable brand. In that same period, rival BlackBerry has gone from world beating tech firm to just plain beaten.

The sheer speed and scope of BlackBerry’s collapse has a Nortel-like feel to it, and offers a sad reminder of just how few companies of BlackBerry’s calibre exist in Canada. In Interbrand’s list of the top 100 brands, which Apple now tops, the only Canadian firm is Thomson Reuters, at number 47 (better known for its U.K.-based Reuters arm). Nowadays, Canada’s most successful (i.e. profitable) companies are banks, which thrive mostly because they are protected from outside competition, not because they’re particularly competitive. You can count on one hand the number of truly innovative Canadian companies—the kinds that are creating new markets, new products and fuelling R & D. Bombardier is one. Magna International another. That’s about it.

This is a dangerous trend. It’s companies like BlackBerry that ultimately create jobs and lift the economy. Hundreds of tech firms and thousands of jobs now exist in the region of Waterloo, Ont., because of it—whether or not they’ll survive in the absence of BlackBerry is a subject of debate. As of August, unemployment in Kitchener-Waterloo was at eight per cent, up from 6.6 per cent a year ago.

But the problem in recent years runs even deeper than a dearth of innovative, globally competitive firms. As Bank of Canada governor Stephen Poloz noted in a recent speech, for every new company that was created between 2008 and 2012, another one failed— and if the number of companies isn’t growing, neither are exports or the economy as a whole. Poloz was, however, optimistic that Canada is “turning the corner,” with new companies suddenly being created at a stronger pace than expected. In September, there were 40,000 more companies than at the same time last year. These new firms are the “natural engine for growth,” said Poloz, creating new products, ideas and an “outsized proportion” of jobs.

Here’s hoping one or two of those companies are Apples, or even BlackBerrys, in the making.

The good news

The U.S. economy is back on track: GDP grew at an annualized rate of 2.5 per cent in the second quarter, up from 1.1 per cent at the start of the year. In the same period, household net worth hit a record $74.8 trillion.

China opened a new free-trade zone in Shanghai last week. It could pave the way for wider financial reforms, and a more investor-friendly country.

The Canadian economy grew at its fastest rate in two years in July, up 0.6 per cent—raising the odds that third-quarter growth will crack two per cent.

In one of the surest signs of an economy on the mend, 51 per cent of Americans plan to make a big purchase, such as a TV or a car, this year, says an American Express survey. Among wealthier households, it’s 62 per cent.

Bombardier won high praise for its new C-Series jet from the CEO of Indonesia’s Lion Air, who called it a “big quantum leap” for the company. Can a big purchase be far behind?

‘Go West’ is good advice if you’re a Canadian. Saskatoon, Regina, Edmonton, Calgary and Vancouver will lead all other Canadian cities in economic growth in 2013, says the Conference Board of Canada.

Britain’s $5.3-billion IPO for the Royal Mail was reportedly sold out within hours last week. Time to rethink privatizing the money-losing Canada Post?

The bad news

Lawmakers in the U.S. were doing their best this week to undermine the recovery, forcing a government shutdown, which could cost the country as much as $300 million a day in lost output.

The kids aren’t all right: A new U.S. study says that, on average, workers are now 30 years old before they make the median income of $42,000, up from 26 in 1980.

Ottawa’s budget deficit widened to $4.5 billion for the April-to-July period this year. The Finance Department, undaunted, says the fiscal outlook is “on track.”

U.S. home sales have been so strong—up 18.4 per cent in the 16-month period ending in July—that they’ve sparked concerns of yet another housing bubble in the making.

Nine Japanese auto-parts firms pleaded guilty in the U.S. last week to price fixing, and will face more than $740 million in fines. None of it will go back into the pockets of the 25 million people who overpaid for their cars as a result.

The number of mergers and acquisitions in the oil sands is at a nine-year low. As investment fades, so does Canada’s dream of becoming an “energy superpower.”

Maersk may have made a Titanic mistake. It says shipping has been more sluggish than expected when it spent billions building the world’s biggest container ships two years ago.

Stock Signs: Go small or go home

The Russell 2000 index hit an all-time high last week. The index tracks the stocks of smaller U.S. companies with a market valuation of around $1 billion. Investors, it seems, are expecting big things from smaller firms.

New York Attorney General Eric Schneiderman is calling for a crackdown on high-frequency traders who pay to get key economic data a few minutes before everyone else. He called it “insider trading 2.0” because “these guys are moving the starting line halfway to the finish before their competitors even have their feet in the blocks.”

The market for IPOs appears to be heating up. Chrysler, Hilton Worldwide Holdings and Twitter all have offerings planned this fall. There are also rumours that King, the company behind the smartphone game Candy Crush Saga, is preparing for an IPO, suggesting tech firms are once again taking aim at the public markets.

Lockheed Martin has tripled the size of its share-buyback program and boosted its dividend. With Washington in the grips of another budget showdown, the defence giant is preparing its shareholders for a period of subpar growth.

]]>In its ongoing free trade talks with Europe, Ottawa is reportedly offering to lift foreign investment restrictions on takeovers by European firms: Deals worth less than $1.5 billion would no longer be up for government review. This comes after its omnibus budget bill that raised the threshold for reviewing foreign takeovers to those worth over $1 billion, up from $344 million. All this suggests that Canada is more open than ever to foreign ownership, as it should be: it brings more competition and more investment dollars into the economy. But Ottawa’s actual track record tells a very different story.

Last week, the Globe and Mail reported the government is trying to delay the takeover of the wireless carrier Wind Mobile by VimpelCom. The deal would create a Russian controlled firm that uses Chinese infrastructure. That, it seems, is way more foreign ownership than the government bargained for when it declared last year (in the interest of boosting competition in the sector) that carriers with less than 10 per cent of the market could be wholly foreign owned. The big telecoms, Telus, Bell and Rogers (which owns this magazine), are still limited to 46.7 per cent foreign ownership.

Before that, there was Ottawa’s handling of the $15-billion takeover of Nexen by China’s state-owned CNOOC. The deal was approved this year, but the government said it would be the last of its kind—a decision it may regret as the oil sands industry searches for more capital. And before that, the Tories nixed BHP Billiton’s $40-billion bid to buy Potash Corp. in 2009. The result: BHP decided to start building a rival mine, which would be the world’s biggest if it opens (potash prices have since collapsed, raising questions about the project). There are plenty of other sectors where Ottawa still bans foreign competition outright. Like the airline industry, a consumer-unfriendly duopoly between West-Jet and Air Canada where foreign ownership is limited to 25 per cent.

Since taking power, the Tories have made a show of declaring Canada open for business. But their patchwork of rules and seat-of-the-pants decisions sends a much more powerful message, one Europe won’t ignore as free trade talks continue.

In his final address as governor of the Bank of Canada, Mark Carney concluded: “We cannot grow indefinitely by relying on Canadian households increasing their borrowing relative to income. Nor can residential investment remain near a record share of GDP, particularly given signs of overbuilding and overvaluation in segments of the real estate market.”

Obvious as that may sound, growth by debt has been Canada’s only real game plan under Carney. Weaning ourselves off that addiction will be the single greatest challenge facing the country in the coming years, as interest rates begin to rise—expected some time in 2015—and the housing market cools.

Can it be done? The latest economic data would seem to offer some measure of hope.

Canada’s economy grew at an annualized rate of 2.5 per cent in the first quarter, better than expected and better than the 2.4 per cent in America, which has been in the midst of a healthy rebound lately. (This comes as housing sales dropped three per cent in April from the same time last year and prices, according to a Reuters poll last week, are forecast to drop five per cent in the next few years.)

The growth last quarter was attributed largely to a jump in exports—mostly energy products, which were up 22 per cent on an annualized basis. Exports of crude to the U.S. hit their highest level in February in two decades, said the U.S. Energy Information Administration. For Canada to thrive in a period of rising rates and a cooling housing market, it must, as Carney said, “rotate the sources of growth” toward things like exports.

But trading our addiction on easy money for an addiction to oil is a risky bet. The U.S. is now awash in its own reserves—it already tops Russia as the biggest exporter of refined petroleum—and the future of the Northern Gateway (nixed by B.C. last week) and Keystone XL pipelines (mired in U.S. politics) is as murky as ever. Aside from exports, Canada’s economy is still limping. Domestic demand was up just 0.1 per cent last quarter, the worst showing since 2009. Few economists expect next quarter’s results to be as rosy as the last.

So where does that leave Canada? For the time being, still reliant on low interest rates and its housing market. Old habits die hard.

In Ottawa, the leader of the NDP—the NDP—accused the Conservative finance minister, Jim Flaherty, of “banana republic behaviour” for his efforts to intervene in the economy and influence mortgage rates.

Meanwhile, Flaherty’s one-time ally in his anti-debt fight, Bank of Canada governor Mark Carney, has declared the household debt problem solved— apparently, a debt-to-GDP ratio of 165 per cent is no longer anything to worry about.

In Vancouver, a former prime minister, Kim Campbell, made headlines this month for filing a lawsuit in which she’s trying to get out of a 2007 condo purchase and recoup a $368,000 deposit. The Canadian housing market, it seems, has entered the twilight zone.

It’s getting harder and harder to tell what’s sensical and what’s nonsensical. Even the Tory cabinet can’t seem to agree if it should be concerned about Canadians taking on big mortgages at discount rates, with the Tories’ Small Business Minister Maxime Bernier joining Thomas Mulcair in his criticism of Flaherty.

There is nothing encouraging in all this.

The eternally upbeat Canadian Real Estate Association is now forecasting a bad year ahead, with only Manitoba and Alberta expected to see sales gains.

More serious trouble can be seen in the Teranet-National Bank house price index, which recorded its sixth straight month-to-month decline in February. That has been blamed on Flaherty’s recent effort to tighten mortgage rules. Nevertheless, such price declines, coming after a long period of slumping sales, are a sign of a market that’s increasingly out of balance.

Flaherty helped create the housing bubble by relaxing mortgage rules early in his tenure and now seems intent on making sure he can at least say, “I told you so,” when trouble arrives along with rising interest rates.

Campbell’s lawsuit alleges her unit was delayed by over a year. But anyone who has bought a condo in Vancouver can sympathize with her action. A study last week estimates that 15 per cent of condos in the downtown are empty. House prices have as much to do with human psychology as they do location, and when some of our best and brightest appear to lose faith, it doesn’t bode well for the rest of us.

The Internship may be the first Hollywood buddy movie in which a major company is given a starring role, and not as the villain.

The movie is about two laid-off salesmen (Vince Vaughn and Owen Wilson) who snag famously hard-to-get internships at Google. Hilarity ensues at the company’s headquarters in Mountain View, Calif., as they compete in “some sort of mental Hunger Games” against America’s best and brightest for a job.

Google played a role in the making of the film and recently helped promote it on its social networking service, Google+.

Due out in June, it’s a marketing coup for the firm at a time when it’s trying to push its brand beyond its search-engine roots.

This month, it was reported that Google plans to open its own U.S. retail stores. And last week, it released details about Google Glass, its web-enabled eyeglasses that will compete in the wearable-technology market with rival Apple’s anticipated iWatch. Investors appear happy with the new direction: last week, Google’s stock passed the $800 mark for the first time.

For five years now, the loonie has been at par with the U.S. dollar, but for a small deviation in 2009. And for all that time, Canadian shoppers have paid more than Americans for the same goods—often more than 20 per cent more, in fact, according to various surveys. A new Senate report last week promised to get to the bottom of this shake-down. What it offered were the same excuses used by retailers: we are a small, less competitive country with border restrictions and geographic challenges that drive up prices.

But is Canada really such an undesirable place to do business? Consumers here are richer on average than Americans, more likely to be employed and far more willing to go into debt to buy things. In the U.S., credit card debt rose just 0.1 per cent in December, while consumer debt just hit a new high in Canada. We are, if anything, a retailer’s dream. Our willingness to buy stuff is part of the rea- son Target and J. Crew are expanding here.

There are a few reasons to explain slight price differences. It costs something to print up French labels. It costs money to transport goods here (but that’s greatly overstated in a country where most people live next to the U.S. border). None of it explains the hefty markups on everything from appliances to cars, some of which are made in Canada.

When the loonie first hit par, retailers and manufacturers said it would take time to adjust. Some have matched prices, proving it can be done profitably. So what’s the real reason for the price gap? It can only be that Canadians are willing to pay more, perhaps because our economy has performed better than America’s. Retailers are charging what the market will bear. And until shoppers take their business elsewhere, i.e., across the border, that won’t change.

Reality television’s latest obsession is gold. Jungle Gold, Gold Rush, Bering Sea Gold and Gold Fever are all shows documenting miners’ efforts to dig up flakes of the precious metal worth $1,700 an ounce. The last time TV was so caught up in a trend it was in the house-flipping genre (Flip This House, Flip That House), which seemed to hit its peak just before the U.S. housing market crashed. Is there a similar warning sign in the TV gold boom? Does all the mainstream fascination with gold suggest an overinflated interest and price?

Some analysts on Wall Street, at least, seem to think gold’s wild ride may be nearing its end. This week, Morgan Stanley lowered its gold-price forecast for the year by four per cent, to $1,773. Late last year, Goldman Sachs cut its target price for 2013 to $1,800 an ounce from $1,940, citing an improving U.S. economy. “The risk-reward of holding a long gold position is diminishing,” it said.

Gold is the ultimate safe-haven investment and has enjoyed an incredible rise in recent years. A decade ago, gold was worth little more than $300 an ounce. Since 2000, it has gone up every year for 12 years (a record) and in each of the three years after the 2008 crash, gold prices peaked to hit record highs. That gold might be finally losing some of its shine suggests fear of riskier investments may be ebbing. The S&P 500 index last week, for instance, cracked the 1,500 mark for the first time since 2007.

Not everyone is convinced the gold rush is finished just yet. Morgan Stanley said that despite its price cut, it still remains “bullish on the gold-price outlook,” citing an ongoing commitment in the U.S. to low interest rates and government stimulus spending in the face of “a below-par recovery.” Many central banks are also still buying gold. As Goldman admits, “calling the peak in gold prices is a difficult exercise.”

Gold prices should eventually ease as the global economy recovers. But if you’re a Gold Rush fan, you may not want to change the channel just yet.

]]>Last year, Hyundai, along with Kia, which it partly owns, admitted it had overstated fuel-efficiency ratings on some new cars and promised to compensate buyers. This week, the carmakers revealed just how much the error will cost. They have set aside nearly half a billion dollars (US$225 million for Hyundai and US$187 million for Kia).

The hit comes at an already tough time for the South Korean companies. While they’ve been enjoying rising sales in North America, one key advantage—favourable exchange rates—is deteriorating fast as the won rises against the dollar and the yen in Japan, home to chief rival Toyota. Last week, Hyundai reported that its quarterly profit fell a surprising 5.5 per cent. Over the past four years, Hyundai was the world’s fastest growing automaker. Now, facing what company chairman Chung Mong Koo calls “a very difficult year,” that streak seems certain to come to an abrupt halt.

]]>http://www.macleans.ca/economy/business/the-other-korean-crisis/feed/0The real challenge now facing BlackBerryhttp://www.macleans.ca/economy/business/the-real-challenge-now-facing-blackberry/
http://www.macleans.ca/economy/business/the-real-challenge-now-facing-blackberry/#commentsWed, 30 Jan 2013 15:44:57 +0000http://www2.macleans.ca/?p=344516No matter how good the new BlackBerry Z10 is, it is worth remembering that this is the challenge it now faces: BlackBerry’s global market share is just 4.7 per cent.…

]]>No matter how good the new BlackBerry Z10 is, it is worth remembering that this is the challenge it now faces: BlackBerry’s global market share is just 4.7 per cent. Android’s share: 68 per cent. And Apple, 19 per cent. In 2007, Research In Motion’s user base was 70 per cent corporate clients. Today, just 20 per cent.

To make a dent in its rivals’ numbers, RIM’s new phone can’t be merely as good as the latest Samsung or iPhone. It needs to be vastly better. Has it done that with the BB10?

Only a handful of years ago, the reverse was true: RIM was dominant and few thought Apple had any shot at unseating it. But the iPhone really was seen as revolutionary when it launched in 2007 and RIM, inexplicably, seemed to ignore it. Would anyone make the same mistake again?

]]>http://www.macleans.ca/economy/business/the-real-challenge-now-facing-blackberry/feed/1Econowatch: American debt nears its legal limithttp://www.macleans.ca/economy/business/econowatch-52/
http://www.macleans.ca/economy/business/econowatch-52/#respondThu, 17 Jan 2013 21:00:00 +0000http://www2.macleans.ca/?p=337991A monthly scorecard on the state of the economy in North America and beyond

America’s debt, now at $16.4 trillion, is growing by about $1 trillion a year. Nearing its legal debt limit, the world’s most powerful nation is, incredibly, weeks away from defaulting for the second time in as many years. It should be obvious by now that it needs to take some drastic measures, no matter how painful, to tackle its debt problem.

But so far the U.S. has only buried its head in the sand. One solution that emerged last week to dodge the debt ceiling was to mint a trillion-dollar coin, which, when deposited in the Treasury, would allow America to pay its bills. First floated as a joke, it was being seriously discussed by economists and lawmakers as a kind of accounting trick to instantly boost the money supply without any punishing side effects. Debt-ceiling crisis averted, the government could simply sell more bonds, and melt down the coin. Another quick-fix proposal: for Washington to issue scrip, or IOUs, to pay its bills.

Proponents say these solutions are no more ridiculous than the artificially imposed debt ceiling and the political gamesmanship that has taken the U.S. budget hostage. That may be true, but in the absence of any other meaningful solutions—like spending cuts and tax increases—some of America’s biggest foreign lenders appear to be losing patience and faith. The foreign purchase of treasuries as a percentage of those issued has been in decline since 2008. China’s top credit rating agency, Dagong, put the U.S. on its “negative watch list” in December. The U.S. already lost its AAA rating in 2011.

President Barack Obama said this week that the idea the U.S. would default is absurd —it is “not a deadbeat nation,” he argued. But it does seems headed in that general direction.

The good news

The U.S. auto industry continues to roar back. Ford plans to hire 2,200 white-collar workers this year as it expands its lineup of cars, trucks and SUVs.

U.S. oil production reached its highest level in two decades this month due to a boom in unconventional sources like shale, meaning more domestic jobs and less overseas conflict.

China’s growth may have slowed, but there are still signs of life in one of the world’s most important economies. Exports surged 14 per cent last month, the most since May.

U.S. regulators are implementing new mortgage rules for American borrowers. No more risky teaser rates and “interest only” loans. A terrific idea, a few years too late.

Canadians may finally be dialling back their borrowing. Consumer debt grew 4.7 per cent in November compared to 4.9 per cent in October, according to Royal Bank of Canada.

Both the Canadian and the U.S. economies added jobs in December—39,800 and 155,000, respectively. Canada’s unemployment rate fell to 7.1 per cent, its lowest in four years.

The bad news

The unemployment rate in the eurozone hit a new record of 11.8 per cent, the highest level since the currency was established in 1999. Nearly 19 million people are out of work.

A drop in manufacturing is raising concerns that the British economy may be sliding back into recession. Factory output came in at just 0.3 per cent between October and November, well below expectations.

A big U.S. employer, Boeing, has orders for more than 800 of its 787 jets, but its first customers are less than thrilled after a string of mishaps ranging from fires to fuel leaks.

High-end jeweller Tiffany reported mediocre sales over the holidays while several of its middle-market competitors posted healthy gains. Do the wealthy know something the rest of us don’t?

CFOs at companies in Canada and the U.S. are growing less confident in the economy, according to a recent survey by Deloitte. The most pessimistic executives are Canadian.

Personal computer sales fell over the holidays for the first time in five years, as consumers gravitated to smartphones and tablets. With a cheaper iPhone rumoured to be in the works from archrival Apple, it’s not the Christmas present that Microsoft Corp. and its all-new Windows 8 desktop operating system was hoping for.

A businessman who paid $7 million for a former B.C. mining town in 2005 envisioned an “eco-village” for artists and spiritual types. But thanks to Canada’s energy boom, he’s now planning a liquefied natural gas refinery and shipping terminal instead.

The Big Mac used to be synonymous with McDonald’s, but after years of menu tinkering, young customers increasingly see it as just another burger. The chain hopes a Big Mac relaunch, with a major ad campaign this year, will whet appetites again.

The story of a Chinese home buyer with a suitcase full of cash is a common one in real estate circles. And it’s not just an urban legend. Officials at airports in Vancouver and Toronto seized nearly $13 million in cash from Chinese nationals last year—mostly tucked into suitcases and purses, according to the Wall Street Journal.

By the numbers

25 per cent: The annual return posted last year by Citadel, one of the world’s top hedge fund firms. The industry average return: closer to six per cent.

5,400: The number of jobs American Express plans to cut due to its travel business being hurt by Internet rivals.

$706 million: The value of MacDonald Dettwiler and Associates’ new contract with the Canadian Space Agency to build and launch three new surveillance satellites.

]]>http://www.macleans.ca/economy/business/econowatch-52/feed/0Econowatchhttp://www.macleans.ca/economy/business/econowatch-51/
http://www.macleans.ca/economy/business/econowatch-51/#respondWed, 19 Dec 2012 18:40:01 +0000http://www2.macleans.ca/?p=327397A monthly scorecard on the state of the economy in North America and beyond

In approving the $15-billion takeover of Nexen Energy by China’s CNOOC, Stephen Harper cautioned that the sale was “the end of a trend.” Foreign ownership in the oil sands is okay, this time, but in the future, state-owned enterprises (SOEs) must be kept at bay, Ottawa ruled. The move was politically astute, but may prove economically dangerous. While attention has focused on whether we should fear SOEs like CNOOC and Malaysia’s Petronas (which also won approval to buy Progress Energy), the really scary question is: what will become of Canada’s oil sands without them?

As investors go, SOEs might not seem ideal. Critics argue they open the door to foreign governments dictating where our oil is sold and at what price. But Canada holds the trump card in the relationship through its ability to dictate royalty and tax rates, as well as labour and environmental laws that SOEs have to follow just like anyone else. Even if they decided to sell oil to China at less than market prices, the loss would be theirs, not ours.

The fact is that SOEs, not just in China but across Asia and the Middle East, rank among the few with the kind of money needed to fuel Alberta’s oil sands, where capital spending alone is expected to climb to more than $200 billion by 2025. They control 70 per cent of the word’s oil reserves, and 13 of the 20 biggest oil companies are state-run. This week, Natural Resources Minister Joe Oliver told the oil sands industry that investment will still flow into Alberta despite the recent ruling. Yet SOEs have been providing the bulk of the funding recently. Chinese SOEs have now sunk more than $25 billion into Canada’s energy sector since 2009. Ottawa is stressing that investment by SOEs is still welcome, just not ownership—not exactly an arms-open invitation.

Putting up any kind of barrier to investment is probably the worst thing Ottawa could do. “We have an ideology that says a free-market economy must also have a democratic government behind it,” explains David Detomasi, a professor of international business at Queen’s University. “A big chunk of the world doesn’t believe that. And they’re the ones with the cash.”

The good news

Starbucks expects to open 1,500 new cafés in the U.S. over the next five years, a strong bet that Americans will be in better shape to fork over $7 for its newly launched Costa Rica Finca Palmilera brew.

’Tis the season to raise a glass . . . or three. Sales of beer, wine and spirits are on track to set a record this holiday, with $85 being spent by the average Canadian.

Bonuses for employees at Canadian banks were up 7.5 per cent this year. That’s in stark contrast to New York and London, where pay cuts remain the norm.

Canada has moved to eighth place, up three spots, in an annual ranking of the most tax-friendly places for companies to do business. It’s our first time in the top 10.

The Canadian and U.S. economies added jobs in November: 59,300 and 146,000, respectively. The jobless rate fell to 7.2 per cent in Canada and 7.7 in the U.S. (the lowest level in years).

Canada’s auto parts sector has been running full tilt. Production is forecast to be up over 22 per cent this year, says the Conference Board of Canada—the best output since 2007.

China’s industrial output rose 10 per cent in November, the biggest jump since March, thanks to more big infrastructure projects. They include six brand new subway systems in Chinese cities.

The bad news

Canadians are working two years longer than they did in the ’90s, says Statistics Canada. Less-educated workers have it worst: their life expectancy after retirement is shorter than university-trained workers.

Economists at CIBC are concerned about a chronic mismatch in the Canadian job market: not enough qualified people to fill high-demand jobs, and a glut of people seeking unskilled positions.

The NHL lockout delivered a body check to GDP growth in the third quarter. Spending on entertainment, including hockey games, was down 2.6 per cent.

Japan’s economy officially fell into recession after GDP shrank 0.9 per cent in the third quarter. It could soon be joined by Germany, another export nation, as the eurozone crisis deepens.

Food prices will rise by as much as 3.5 per cent next year, according to University of Guelph researchers. Meat products are expected to lead the way, thanks to droughts in the U.S. last year that raised feed prices.

The ultimate engine of the U.S. economy, consumer spending, is weakening. One key measure of consumer sentiment fell to its lowest level in four months last week.

The Bank of Canada warned last week that a Toronto condo market correction could rock the entire economy. Housing sales in Toronto were down 16 per cent in November compared to last year.

Signs of the Times

Moving mountains

Netflix CEO Reed Hastings has a lot to boast about lately, including a recent blockbuster deal to stream Disney movies. But Hastings had better be careful where he does his bragging. He’s now in hot water after posting on Facebook that Netflix users streamed over a billion hours of video in June. U.S. regulators called it “selective disclosure,” given that he only has about 200,000 followers.

In a historic first, a liquified natural gas tanker sailed from Norway to Japan through the normally ice-choked Arctic. Due to global warming, the specially reinforced ship is hoping to shave three weeks off a trip that normally goes through the Suez Canal. Whether it’s a feat to be celebrated is another question entirely.

A Chinese developer is embarking on a bold project to flatten 700 small “mountains,” or barren hills, as part of a $11.2-billion plan to expand the desert city of Lanzhou in northwestern China, population 3.2 million. The entire controversial project involves 806 sq. km. Critics are concerned about a lack of sufficient water resources and the city’s already dubious reputation as one of China’s most polluted.

Under scrutiny over working conditions in its Asian factories, Apple is joining a small but growing number of U.S. companies who are “re-shoring” jobs. CEO Tim Cook promised to spend $100 million to build Mac computers in the United States. A baby step to be sure, but there’s hope other U.S. executives will be lining up to do the same—just like they did to buy iPhones.

‘The U.S. GDP growth rate that we have become accustomed to for over 100 years—in excess of three per cent a year. It is gone forever.’

—Influential U.S. investor Jeremy Grantham is known for his bearish views, but in his latest newsletter, his pessimism hit a new low, with a prediction that economic growth in the U.S. will be stuck at just one per cent indefinitely.

By the numbers

25 per cent The number of Canadians expecting a year-end bonus, says a BMO poll.

11,000 The number of jobs Citigroup is cutting—four per cent of its workforce.

4.9 million The number of unemployed people in Spain in November. The jobless rate is 25 per cent.

$1 billion The amount of Apple stock bought by a rogue ex-trader at Rochdale Securities. He was charged with wire fraud last week.

$1.9 billion The biggest antitrust penalty ever, imposed by the European Commission on six electronics firms accused of fixing prices.

$11 billion The amount the head of Norway’s Government Pension Fund says the fund plans to invest in the U.S. real estate market.

$2.8 trillion Total U.S. consumer debt, a record. Americans borrowed big in October for cars and student loans.

]]>http://www.macleans.ca/economy/business/econowatch-51/feed/0Econowatchhttp://www.macleans.ca/economy/business/econowatch-50/
http://www.macleans.ca/economy/business/econowatch-50/#respondTue, 27 Nov 2012 19:04:01 +0000http://www2.macleans.ca/?p=317446A monthly scorecard on the state of the economy in North America and beyond

]]>Markets are sinking; foreclosures are rising; and the fiscal cliff is looming. The United States is in pretty rough shape again. Right on cue, the Occupy Wall Street movement is back, with a new campaign launched last week called Rolling Jubilee. Described as “a bailout of the people by the people” it buys up distressed household debt (like credit card debt) that’s normally sold by lenders to collection agencies for a fraction of its original value. Rather than try to collect on it, Rolling Jubilee forgives the debt. As of last week, it had raised $285,000 in donations, enough to buy $5.7-million worth of defaulted loans.

Rolling Jubilee has received almost unanimously positive attention (even Forbes praised the idea). It uses private donations, and the way the distressed debt is sold means those lucky enough to have their debts forgiven are chosen at random. More importantly, it’s a creative, free-market response to what is still a serious problem dogging America’s economy, and one that could soon blow the bottom out of Canada’s.

Last week, a Bank of Canada official warned yet again that household indebtedness is the biggest risk facing the economy—bigger than a U.S. recession, Europe’s debt crisis or falling demand for commodities. Interest rates aren’t going anywhere (except maybe down), either, so indebtedness is only going to keep growing. (It’s fair to say the central bank’s debt warnings over the years have been useless, and now border on disingenuous).

It’s also clear the housing market is now going in the wrong direction (with starts and sales falling, and prices surely not far behind), which should make anyone with a big, fat mortgage pretty nervous. Here’s hoping this Rolling Jubilee effort takes off in a big way. It could come in handy.

The good news

Americans may be panicked about the fiscal cliff, but businesses are confident consumers will keep spending. Inventories rose 0.7 per cent in September.

In the first 24 hours after its release, the video game Call of Duty took in $500 million worldwide—the biggest box-office opening ever. Nerds rule.

North American airlines got a lift when the European Commission delayed a decision to hit carriers with costly levies for carbon emissions on flights to the continent

Home Depot reported a third-quarter profit of $947 million, with sales up 4.6 per cent—a sign the U.S. housing market is back on solid ground

Canadian exports rose 1.9 per cent, to $38 billion in September. Exports to countries other than the U.S. were up 3.6 per cent to $10.2 billion

Manufacturing sales in Canada grew for the second straight month in September, up 0.4 per cent. The aerospace and parts industry led with a 43 per cent jump.

The bad news

The Canadian economy will grow at less than two per cent until mid-2013, when (if) U.S. demand picks up, says BMO. A recovery on life support.

U.S. retail sales fell 0.3 per cent in October—worse than analysts expected. Blame goes partly to the impact of hurricane Sandy.

New home construction fell 8.9 per cent in Canada in October, to 204,100 units. Nine of 10 provinces saw declines, led by Quebec with a 17 per cent drop.

The S&P/TSX composite index was in steady decline last week, slipping below 11,800 points. It opened the year at close to 12,000.

Hostess Brands Inc. filed for bankruptcy, prompting a run on Twinkies in the U.S. The company entered last-ditch talks with striking workers this week.

The dreaded double-dip hit the eurozone, which has been in recession since the end of 2011, new data shows. The recovery that followed the previous recession lasted only 10 months.

‘We are not going to permanently cripple ourselves just because 535 people can’t get along’

The billionaire investor, who has been an advocate of raising taxes for the wealthiest, argues that even if Congress fails to resolve the fiscal cliff by year’s end, America’s resilient economy won’t be thrown into a tailspin.

Signs of the Times

A big boat to nowhere

Investors may not be pleased with Apple, whose shares continued to fall last week, but its employees likely are. The company is introducing perks for workers, like discounts on Apple products, that were not part of the corporate culture under Steve Jobs.

When a country is going to the dogs, it’s not necessarily a bad thing. A new study by Euromonitor International shows that dog ownership has risen the most since 2007 in places where economic prosperity is also on the rise: India, Brazil and Russia, for instance. Dog ownership has been on the decline in Greece, France and Japan.

Mining company Vale spent about $2 billion building new supersized freighters to ship ore to China. Now China is barring them from its ports, citing safety concerns. Observers say the move is really designed to protect China’s state-owned shipping industry. Foreign shippers have also recently been banned from China’s rivers.

Attention retailers: don’t mess with America’s favourite holiday. Target ran afoul of not just customers but some of its big investors over plans to launch holiday sales on Thanksgiving Day, rather than on the traditional day after, Black Friday.

By the numbers

11 per cent The amount Canadians plan to cut their holiday spending by this year, according to a RBC survey.

70 Number of new partners named by Goldman Sachs, the lowest in a decade. Only 10 are female.

500 Number of jobs cut by Sun Media Corp., Canada’s biggest newspaper chain, in an effort to slash costs by $45 million.

2.8 million Number of cars included in Toyota’s latest global recall.

49.7 million Number of Americans living in poverty, according to a new census report—3.5 million more than earlier estimates.

$4.5 billion The record settlement that BP will pay to the U.S. over the 2010 Gulf of Mexico oil spill.

]]>http://www.macleans.ca/economy/business/econowatch-50/feed/0Econowatchhttp://www.macleans.ca/economy/business/econowatch-49/
http://www.macleans.ca/economy/business/econowatch-49/#respondWed, 14 Nov 2012 18:10:01 +0000http://www2.macleans.ca/?p=312496A monthly scorecard on the state of the economy in North America and beyond

]]>Whatever faith there was left in the Canadian economic miracle, it is fast eroding. Everyone from bank economists to the parliamentary budget officer to the International Monetary Fund is cutting growth estimates. Last week’s report that GDP shrank in August by 0.1 per cent puts the annual growth rate somewhere below two per cent. The results are much the same in the U.S., where growth was two per cent last quarter, up from 1.3 per cent.

Diehard optimists will say any growth is good growth. But today’s climate is starting to feel suspiciously like a recession again.

In the U.S., recent growth has been attributed to a blip in government defence spending. Business investment hasn’t been as weak since 2009. In Canada, growth hangs on the prospect that manufacturing and mining will pick up steam again. How realistic is that? With 10 of 18 industries showing declining output in August, the GDP drop “was no fluke,” said Bank of Montreal chief economist Douglas Porter in a note. “The main message here is that the economy is struggling to churn out any growth whatsoever.”

So what does two per cent growth offer? It does nothing to break the jobless cycle or lift middle-class fortunes. Canada’s unemployment rate is stuck at 7.4 per cent, not far off from the U.S.’s 7.9 per cent. Food bank use is up 31 per cent since 2008, and still rising. Two per cent growth also means more or less stagnant tax revenues, and less chance governments will be able to pay off deficits anytime soon. It could throw a wrench in Ottawa’s plan to balance the budget in three years.

Predictions in 2009 that North America was headed for a “lost decade” now appear depressingly accurate. Two per cent is the new norm, and unfortunately, it’s just not good enough.

The private sector in the U.S. added 184,000 jobs in October, more than expected. The unemployment rate rose slightly to 7.9 per cent, but that was due to people rushing into the job market, showing confidence is on the rise.

After five years of cuts, Canadian firms boosted R & D spending by 6.1 per cent in 2011, to $11 billion, according to a Research Infosource survey of the 100 top-spending firms.

Car sales in Canada jumped 7.8 per cent in October. Small cars and Chrysler minivans were big hits with buyers. Thanks, Dad.

Honda has started production of its $4.5-million “entry-level” business jets. A small enough price tag for execs to hide from shareholders?

The bad news

So far in this third-quarter earnings season, just 36 per cent of U.S. firms say they’re beating sales estimates—the worst showing since the recession.

Facebook shares fell four per cent last week on the first day employees were allowed to start selling stock. Do they know something we don’t?

Even German industry isn’t immune to Europe’s economic crisis. MAN SE, a Volkswagen-owned truck maker, plans to stop assembly lines at two German plants.

The U.S. Treasury says America will hit its debt ceiling by the end of this year, forcing a crisis that could mean a second downgrading of the country’s debt rating.

Condo sales fell 30 per cent in Toronto in the last quarter and developers, facing a record level of unsold inventory, are delaying projects, says market research firm Urbanation. What goes up . . .

A report by Peters & Co. says $17 billion in oil sands assets are up for sale, mostly by U.S. firms looking to exit a slumping industry that is struggling with pipeline bottlenecks.

400 million: The number of people who will be buying new PCs next year, says Microsoft chief Steve Ballmer. A potential boon for the new Windows 8.

$4 billion: Disney’s purchase price for Lucasfilm, which it intends to start recouping with new Star Wars films.

Signs of the time: The hard sell

Once-dominant Japanese electronics firms are suddenly in crisis mode. Sharp is forecasting an annual loss of $5.6 billion and this week questioned whether it can remain “a going concern.” Panasonic said it will post a $9.6-billion annual loss (30 times bigger than analysts expected). And Sony just reported a $198-million quarterly loss.

Christmas came in October as stores started rolling out holiday merchandise and advertising. Starved of good cheer in recent years, retail sales in Canada are expected to rise 3.5 per cent this holiday season, says Ernst & Young.

How desperate are carmakers getting? In the U.S., Chevrolet showed off a Hot Wheels-branded Camaro with, yes, flames on the side. Not to be outdone, Honda is targeting female buyers in Japan with a pink Fit model that comes equipped with a special air filter said to prevent wrinkles.

A private island is deemed to be the ultimate sign of success, and there has never been a better time to buy one. Prices of coastal islands in Canada and the U.S. remain 25 per cent below their pre-2008 high, according to the Wall Street Journal.

]]>Google made two big announcements last week. The one that got the most attention was its accidental release of quarterly financial results hours before markets closed, with a space for comment from CEO Larry Page reading: “Pending Larry Quote.” The less-than-stellar numbers included sent Google’s stock falling nine per cent.

Google’s other news was mostly overlooked amidst the earnings embarrassment, but is likely to have a bigger long-term impact. It released a $250 laptop, the Chromebook. The ultra-cheap computer (made by Samsung and running Google’s Chrome operating system) is described in a punk-rock-themed ad as the laptop “for everyone”—a family- and student-friendly alternative to tablets like the iPad that cost closer to $600. It’s not just hated rival Apple that Google has its sights on. The Chromebook comes out just as Microsoft is set to release a critical overhaul of Windows and its Surface tablet.

Rap Genius is a website where users annotate the lyrics of popular rap songs—offering listeners insights into the slang and hidden meanings of, say, Kanye West’s latest, Clique. It is a popular online diversion, and in the eyes of some Silicon Valley venture capitalists, the web’s next big thing. Last week, Andreessen Horowitz, a firm that has backed Twitter, Facebook, Groupon and Skype, put $15 million into Rap Genius. Explaining the investment, partner Marc Andreessen said that he sees Rap Genius expanding beyond rap to other genres and art forms, with an online community annotating everything from literature to political speeches, scientific papers and the Bible. “The big missing feature from the web browser,” he wrote on the site, “is the ability to annotate any page on the Internet with commentary and additional information.” One useful note on this point: Andreessen speaks with some authority—he happens to be one of the creators of the very first web browser, Mosaic.

]]>Technology can be frustrating. But smartphones, with their tiny touchscreen keypads and countless bells and whistles, can be downright maddening at times. Who hasn’t felt the temptation to whack their device into submission at one time or another?

Microsoft, it seems, feels your frustration. It recently filed a patent for “controlling an audio signal of a mobile device by detecting a whack.” In other words, when you want to silence your phone, you hit it. Microsoft cites the growing “capability and complexity” of today’s mobile devices for the need for its whack-it function. Tech bloggers have responded with equal parts glee and tongue-in-cheek humour to the filing. “I hereby dub this the clapper of the modern world,” said The Next Web. Many hope to see the technology appear on phones running Microsoft’s new Windows 8 operating system. In an increasingly crowded smartphone market, even modest improvements can help a company stand out.

]]>http://www.macleans.ca/economy/business/a-smash-hit/feed/0Econowatch: September 2012http://www.macleans.ca/economy/business/econowatch-48/
http://www.macleans.ca/economy/business/econowatch-48/#commentsMon, 17 Sep 2012 17:11:01 +0000http://www2.macleans.ca/?p=292665A monthly scorecard on the state of the economy in North America and beyond

When analysts talk about corporate earnings in America these days, they often cite two numbers: regular earnings and earnings without Apple. In the first quarter, the technology giant accounted for fully 35 per cent of the growth in S&P 500 earnings. The quarter before that, more than half. Strip out Apple’s earnings, in other words, and corporate America remains a scary place. Is Apple a lone bright spot amid the devastation, or could it be something more: proof that the U.S. can still be an innovation leader?

Apple, now the biggest U.S. public company ever, worth $620 billion, is a behemoth whose influence extends well beyond its ability to distort markets. Not since Ford threw the U.S. into recession in 1926—when it closed factories for several months—has a company seemed to hold such sway over the economy. Although Apple can’t flick a switch and send the country into a tailspin (its manufacturing is done in China) the company has, it claims, created 500,000 jobs in the U.S. It has helped create an entirely new gadget economy where smartphones and telecoms are the new oil fuelling growth. J.P. Morgan’s top economist said sales of Apple’s new iPhone 5 could add as much as half a percentage point to U.S. GDP growth this year.

Still, Apple’s real stranglehold is more psychological—something seen in the obsessive attention it gets from the media and investors. This fervour will be on display this week with the anticipated launch of the iPhone 5. And it is why Apple has come to be seen as a bigger symbol of overall American success. But scratch deeper and the Apple obsession is glossing over big problems. A report by the Information Technology & Innovation Foundation ranked the U.S. second from last in its global survey on improving innovation in the past decade. Incredibly, by one estimate, earnings for S&P 500 tech companies would have turned negative this year if not for Apple.

This week’s Apple product event was being hyped weeks ago as one of the biggest consumer electronics events ever. But as Research In Motion has shown, domination is no guarantee of future success. If you want to build an economy around one company, Apple is not an ideal choice. What the U.S. economy badly needs now is another 100 companies just like Apple.

By the numbers

10%

: Canadians who subscribe to the online video streaming service Netflix, up from six per cent last year, reports the CRTC.

$69

: The lowest price of Amazon’s new Kindle. The company also unveiled a higher-end version to compete with the iPad: the Kindle Fire HD, for $499.

$206

: The weekend box-office draw per screen from the film Oogieloves, one of Hollywood’s most epic flops.

20 million

: Sales of Samsung’s Galaxy S III smart phone in the past three months. Google reported it is activating 1.3 million Android devices a day.

$9.5 billion

: The drop in value of Mark Zuckerberg’s stake in Facebook since the IPO. He committed to not selling any of his 504 million shares for a year.

$18 billion: Expected value of shares in bailed-out insurer AIG that the U.S. government plans to sell.

Signs of the Times: Down with the ship

The era of stainless steel appliances—an industrial look synonymous with the U.S. real estate boom—is apparently over. Suffering from a weak U.S. housing market, makers of stoves and refrigerators now claim black glass and glossy white are the latest must-haves, according to the Wall Street Journal. Homeowners, however, would be wise to pay down their super-sized mortgages before they opt for a new kitchen.

In a case of life imitating art—or at least the computer-generated images used to make that art—the studio behind such epic disaster movies as James Cameron’s Titanic is itself at risk of sinking. Digital Domain Media Group has filed for bankruptcy protection and is searching for a buyer.

Intent on surpassing General Motors and Toyota to become the world’s largest automaker, Germany’s Volkswagen unveiled a sleeker and lighter version of the bestselling Golf (a car it has sold 30 million of since 1974). The small-car segment is the most important and competitive for today’s global automakers, and VW is betting big on the new design. It will feature a platform that the automaker plans to use on half of the cars it sells in the coming years.

The Andy Warhol Foundation for the Visual Arts plans to sell off $100 million worth of the late Warhol’s lesser-known works in an effort to raise money for its grant-making activities. While Warhol remains one of the world’s most popular and bestselling artists, some collectors have expressed serious concern that a flooding of the market will hurt prices and dilute the Warhol brand.

The Quote

‘I’m not going to do in four months what my predecessors haven’t done in five or 10 years. I’m in combat mode.’

—French President François Hollande outlined his tough new austerity plans, which include $13 billion in spending cuts and over $25 billion in new taxes, including a 75 per cent tax on those earning more than $1.25 million.

]]>http://www.macleans.ca/economy/business/econowatch-48/feed/4REVIEW: Every Love Story is a Ghost Story: A Life of David Foster Wallacehttp://www.macleans.ca/culture/books/review-every-love-story-is-a-ghost-story-a-life-of-david-foster-wallace/
http://www.macleans.ca/culture/books/review-every-love-story-is-a-ghost-story-a-life-of-david-foster-wallace/#respondFri, 07 Sep 2012 19:40:01 +0000http://www2.macleans.ca/?p=289723Book by D.T. Max

]]>The basic biography of David Foster Wallace is well known: he completed, at age 33, Infinite Jest, a book that became a kind of Catcher in the Rye for Gen-Xers. In 2008, at 46, he killed himself under the growing weight of expectations and depression: “the black hole with teeth,” he called it.

Less well known is just how long and painful that struggle was, and the extent to which Infinite Jest, with its multiple styles, plot lines and loose ends, paralleled phases of Wallace’s life. (One of the book’s key locations, Ennet House, for instance, was a stand-in for Granada House, a halfway house in Allston, Mass., where he spent time.) Max’s enlightening biography is in large part a book about the making and aftermath of Infinite Jest, which covered a period in which Wallace was in and out of institutions for mental health and addiction problems.

Max diligently pieces together Wallace’s life via letters (many of them to Jonathan Franzen and Don DeLillo, writer friends off whom he bounced ideas) and interviews with what seems like everyone Wallace ever met. It’s at times plodding, covering in detail Wallace’s academic and philosophical preoccupations with the meaning of literature. But it also reveals the novelist’s human side. He was a person who had numerous and complicated relationships with women (he once plotted to shoot the husband of someone he was obsessed with), who loved rescued dogs (that ruled his home and ate out of his mouth), and who had a fear of sharks, travel and some elements of American culture, something often at the heart of his best non-fiction writing (A Supposedly Fun Thing I’ll Never Do Again).

While Love Story is mostly for Wallace fans, it’s also a sad tale about an extraordinary life—a tortured artist who fought to do something great, who for a brief time succeeded and found happiness, but who finally succumbed to the problems that had haunted him for so long.

]]>http://www.macleans.ca/culture/books/review-every-love-story-is-a-ghost-story-a-life-of-david-foster-wallace/feed/0Has Greece run out of time and money?http://www.macleans.ca/economy/business/has-greece-run-out-of-time-and-money/
http://www.macleans.ca/economy/business/has-greece-run-out-of-time-and-money/#commentsMon, 23 Jul 2012 15:16:42 +0000http://www2.macleans.ca/?p=276284Germany and the International Monetary Fund both plan to cut off Greece as it seeks another $60 billion to avoid certain bankruptcy, reports Spiegel Online. Greece is struggling to…

Germany and the International Monetary Fund both plan to cut off Greece as it seeks another $60 billion to avoid certain bankruptcy, reportsSpiegel Online. Greece is struggling to meet the conditions of its $157 billion bailout from last March—efforts to trim its massive deficit and boost taxes were complicated by two national elections this spring. Germany appears to have run out of patience (and political capital) when it comes to backing-up Greece, with one government minister stating, “If Greece no longer meets its requirements there can be no further payments …For me, a Greek exit has long since lost its horrors.” A decision by the IMF to pull the plug on Greece would be more worrisome, and likely mean default for the country would happen much sooner (a matter of weeks) than later.

]]>Selling government bonds is hardly a glitz and glamour business, especially in this era of ultra-low interest rates and weak demand in most countries. Japan, one of the developed world’s more indebted nations, has come up with a solution in its bid to help sell $34 billion in bonds this year.

It is enlisting its country’s hottest pop stars, all 90 or so members of the teen girl band AKB48. The group, whose name is derived from a district in Tokyo called Akihabara, will reportedly pitch Japanese reconstruction bonds—money raised will go to areas damaged by the tsunami. The group, with its signature short skirts and knee-high socks, may raise more eyebrows than actual bond sales, but there is no doubting AKB48 is a hot commodity, with broader appeal than just a female teen fan base.

The band has already appeared in a number of commercials pitching everything from candy to cellphones and has racked up $200 million in music sales across Asia.

Novak Djokovic entered the French Open this week as the top tennis player in the world. But you wouldn’t know it by the clothes he wears. Unlike rivals Roger Federer and Rafael Nadal, both endorsed by Nike, Djokovic has until recently worn outfits by Sergio Tacchini, a small Italian label. The designs—one memorable get-up featured a tattoo-like dragon outline—have not been a hit with North Americans who prefer staid polos. Last week, the Serbian star cut ties with the label for a new deal with fashion retailer Uniqlo, which is not known for tennis gear at all but is aggressively opening stores in the United States. The Japanese-based firm is no Nike, but it has the deep pockets to offer Djokovic the marketing payday that has eluded him. And while the terms of the deal weren’t disclosed, if Djokovic wins a historic fourth Grand Slam in a row at Roland Garros, the exposure for Uniqlo could be priceless.

]]>It is every broadcaster’s nightmare, and a TV viewer’s dream come true. Last week, Dish Network Corp. unveiled a new DVR with a feature it calls the “Hopper,” which automatically skips over TV commercials. Other companies have flirted with such technology before but ultimately backed off for fear of angering content providers. TiVo no longer offers an automatic ad-skipping featuring (just the ability to fast-forward ads). Dish says the Hopper will only work two hours after prime-time shows have aired. And analysts say such features are critical to attracting customers at a time when Internet-streaming services are on the rise. Cold comfort for the networks. “How does [Dish chairman] Charlie Ergen expect me to produce CSI without ads?” CBS Corp. head Les Moonves asked reporters at an event showing off the fall TV schedule to advertisers. Ironically, Dish is promoting the device through TV ads on the networks. Fox and NBC have said they won’t run them.

]]>http://www.macleans.ca/economy/business/little-black-box/feed/3Econowatch: the economy this monthhttp://www.macleans.ca/economy/business/greeces-exit-from-the-euro-now-seems-less-a-question-of-if-than-when/
http://www.macleans.ca/economy/business/greeces-exit-from-the-euro-now-seems-less-a-question-of-if-than-when/#commentsTue, 22 May 2012 15:28:01 +0000http://www2.macleans.ca/?p=258980A monthly scorecard on the state of the economy in North America and beyond

With the failure of coalition talks to form a government and new elections planned, Greece’s exit from the euro, or Grexit, as it’s being called, now seems less a question of if than when. The bookmaker Ladbrokes, after a flood of wagers, recently decided to close betting on the subject. “It is safer for us to suspend betting than to keep cutting the odds,” said the company. Banks, meanwhile, are reportedly already setting up trading systems that include a new drachma currency. This has ratcheted up fears of a financial meltdown not unlike Wall Street’s in 2008.

For Greece, the result would be devastating. Tens of billions of dollars worth of aid from the EU would be suspended. It would be frozen out by the lenders it so desperately needs. Its banking system would almost certainly fail. Starting a new currency from scratch is not something that happens overnight either, or at small cost to businesses. Greece would find itself out in the cold in a time of need, without the many benefits of membership in a continental trading bloc.

Yet there is a view emerging that the split might not be such a bad move in the long term. (After all, how much worse could things get in a country where the unemployment rate is over 20 per cent and lenders are already running scared?) A new drachma would rapidly lose value after its launch (by as much as 50 per cent, by one estimate). Many Greek businesses owing money in euros would likely face bankruptcy. But the devaluation would also cut the cost of Greek goods and services, giving a boost to exporters and to the country’s all-important tourism industry. Cheap labour and cheap real estate would lure new businesses. There is some precedent: Iceland’s krona rapidly devalued in 2008. This year, its economy is expected to grow more quickly than the EU’s.

And what of the EU? Some say it would emerge a whole lot stronger without its weakest link. Months of speculation about the Grexit have given investors time to plot an orderly withdrawal. Most importantly, Greece’s pain might convince Spain and Italy that sticking to austerity is a worthwhile price of EU admission. As the German daily Die Welt argued, “In the end, Greece might have done the euro one last favour.”

Signs of the Times: Fashionable finance

Having conquered the world of online book sales, Amazon has set its sights on a new target: high-end fashion. It has already hired a full-time staff of stylists and models and is featuring top designers like Michael Kors. Department stores aren’t happy. They say Amazon’s foray into fashion is threatening to put them out of business.

Researchers at MIT say tablet computers are on track to become the most rapidly adopted technology since electricity was discovered. It took the telephone nearly a quarter-century to reach just 10 per cent of the U.S. market. Cellphones took more than a decade. But the MIT study says tablets have already reached 13 per cent of the U.S. market since Apple launched the iPad in 2010.

Neither a cancer diagnosis nor a scandal involving former protege David Sokol have slowed 81-year-old Warren Buffett. His Berkshire Hathaway is backing Coty in its $10-billion takeover bid for Avon Products. Buffett also recently said he considered a $22-billion acquisition of an unnamed firm before ultimately balking at the price.

Ikea says it plans to open its largest North American outlet in Montreal, just months after opening a mega-store in Ottawa. The mecca for Billy bookcases will be almost half a million square feet, with a restaurant that can seat 600, and parking for 1,400.

By the numbers

1 day Goldman Sachs reported just a single day of losses in its first quarter, while earning $100 million on 24 of the 62 days in the quarter.

54 per cent The Greek unemployment rate among people aged 15 to 24. The youth vote helped lift anti-bailout parties in recent elections.

150 points The drop the TSX suffered to start the week, fuelled by fears of a global slowdown. It hit a new low for 2012.

$103 million North American box-office earnings in the second week for the film The Avengers—breaking a record held by Avatar.

$1 billion The amount being spent by investors to build a ghost town in New Mexico that will be used to test green technologies.

$1.5 billion A lawsuit filed against SNC-Lavalin by investors who allege company directors are responsible for the firm’s stock decline amid a payments scandal.

‘We made a terrible, egregious mistake. There’s almost no excuse for it.’

The CEO of JPMorgan Chase, Jamie Dimon, addressed his firm’s $2-billion trading loss last week, the result of a complex hedging strategy. Weeks earlier he had dismissed worries about the trades as ‘a tempest in a teapot.’

The good news

Toyota said it expects to double its profits in its current fiscal year, having put production troubles from the tsunami and quality-control controversies behind it.

Canadian exports and imports both declined (along with oil prices), but the country’s trade surplus still grew, rising to $351 million in February from $273 million.

Americans are feeling upbeat about the state of their economy. A consumer sentiment index rose several points in April marking the highest gain in almost four years.

Take a breath, Mark Carney. After years of warning about the risks of borrowing, consumers may be listening. A CIBC report says consumer debt levels had their smallest monthly gain in March since the early 90s.

WestJet Airlines’ first-quarter earnings rose 42 per cent to $68 million. It also announced plans to buy Bombardier planes for its new regional service. Welcome news for both Canadian travellers and the aerospace industry.

Canada reported a jobs shocker, adding 58,200 positions, most of them full-time, in April. That’s about six times the number forecasted.

The Canadian Tire shopping empire is stronger than ever: revenue and earnings were up over 20 per cent last quarter, boosted in part by its acquisition of the sporting goods retailer Forzani Group.

The bad news

Same-store sales at 20 major U.S. retailers were weaker than expected last month, according to Retail Metrics. An early Easter and cold weather were partly to blame for America’s empty malls.

Canadian farms are getting bigger, but fewer. In the past five years, their numbers have dropped by more than 23,000, or 10 per cent. The fall of the family farm is a trend with deep roots, dating back to the ’40s.

One analyst rated Loblaw’s stock a sell as the grocer faces weak sales growth and more competition from new arrivals like Target. With food prices also rising, the fight for Canadian consumers is more heated than ever.

Spain nationalized its fourth-largest bank to try to backstop its ailing finance sector, raising new fears that it may need a Greek-style bailout. The euro crisis deepens.

Chinese exports grew just 4.9 per cent last month—half of what economists had expected—while imports rose 0.3 per cent. That could spell trouble ahead for Canada’s resource economy.

The Dutch central bank warned that Europe faces a “lost decade.” Meanwhile the Federal Reserve Bank of Cleveland warned it will take several years to bring the U.S. unemployment rate back down to six per cent. Prepare for long-term pain.

The situation at ailing Internet giant Yahoo! went from bad to worse. CEO Scott Thompson resigned after being accused of lying on his resumé about a degree.

]]>http://www.macleans.ca/economy/business/greeces-exit-from-the-euro-now-seems-less-a-question-of-if-than-when/feed/1Econowatchhttp://www.macleans.ca/economy/economicanalysis/econowatch-46/
http://www.macleans.ca/economy/economicanalysis/econowatch-46/#commentsFri, 06 Apr 2012 01:20:01 +0000http://www2.macleans.ca/?p=248834A monthly scorecard on the state of the economy in North America and beyond

Canada’s retail banking industry is normally a fairly sleepy but profitable place. Competition for consumers tends to come in the form of TV spots about branches open past 4 p.m., rather than big savings rates and cut-rate account fees. So it is unusual to see a real fight break out for customers, as is now happening in the mortgage business. Bank of Montreal has led the charge, slashing rates in a bid to steal market share from its rivals. Suddenly, the banks are in such a tizzy doling out mortgages at such low rates that they’re pleading with the federal government to regulate their business and essentially save them from themselves—a notion which strikes the finance minister as “a bit odd.”

“[Bank executives] must forget that they are actually the ones that issue the mortgages. It’s their market. It’s not my market,” said Jim Flaherty last week. The Conservative government, concerned with rising debt levels, has already stepped in three times before to tighten mortgage rules (requiring shorter amortization periods and bigger down payments). But the banks are the ones that decide the interest rates and lending terms. For any bank to characterize itself as an addict in need of intervention isn’t just odd, it’s insincere.

The real hitch is that banks don’t shoulder the risks associated with insured mortgages backed by the Canada Mortgage Housing Corp.—taxpayers are the ones on the hook. This is where the real intervention is needed. Ottawa is on the right track, having recently set a new $600-billion limit for the amount of mortgage insurance the CMHC can have at any one time. If mortgage risk starts to shift back to the banks, where it belongs, it seems likely the Big Five would have no trouble regulating their behaviour. And the economy would be better off.

By the numbers

10 per cent: The proportion of Canadians now using Netflix. Those users also watch 28 per cent more TV than average.

78 cents: Air Canada’s stock price last week after wildcat strikes by ground workers in Toronto and Montreal.

$1.6 million: The low selling price of the 14-bedroom home in Chicago made famous by the film Home Alone. Jealous, Vancouverites?

62 million: People who visited the U.S. last year, a record (21 million of them were Canadians).

$200 million: The writedown Disney will take on the film John Carter, 2012’s first blockbuster flop.

$25 billion: Profit earned by U.S. taxpayers on mortgage bonds bought by Washington during the financial crisis.

‘I am directing my administration to cut through red tape, break through bureaucratic hurdles and make this project a priority.’

—U.S. President Barack Obama on plans to build the southern leg of the controversial Keystone XL pipeline. Back in January, TransCanada was denied a key permit by the Obama administration for the entire 2,700-km project, stretching from Alberta’s oil sands to the Gulf Coast, in the face of stiff political opposition from environmental groups.

Signs of the Times: To new markets, and beyond

Nissan is planning to dust off the Datsun name after 30 years. Sadly, there will be no return of the 240z in Canada. The move is part of a bid to lure young buyers in emerging markets, like India and Russia, with entry-level cars. Nissan hopes to boost market share to eight per cent globally in the next five years, up from 5.8 per cent.

After guiding McDonald’s through years of steady growth, Jim Skinner is retiring as CEO. His timing isn’t to everyone’s taste. Incoming CEO Don Thompson lacks Skinner’s overseas experience, and outside the U.S. is where real growth opportunities lie.

The head of the Federal Aviation Administration said in a hearing last week that the space tourism industry will be worth $1 billion a year in the United States within the decade. The first liftoffs are scheduled for 2014.

China now leads the U.S. in the adoption of smartphones, according to a new report by the research firm Flurry. Its market is booming—China started 2011 in 11th place among countries. Almost a quarter of all Apple and Android smartphones in the world are now being activated in China.

The bad news

Manufacturing in China hit a four-month low, raising fears of a slowdown in the world’s second-biggest economy and pushing global stock markets down l ast week.

Two economists with the U.S. National Bureau of Economic Research say deep recessions with slow, jobless recoveries will be the new norm. Enjoy the good times while you can.

For the first time Apple is selling more smartphones in Canada than rival Research In Motion. So much for that home-field advantage.

Condo sales were down 59 per cent in Toronto in February from a year earlier. The real estate industry says it’s just a typical February lag, but 59 per cent!?!

The bad news

FedEx is scaling back operations, parking some planes in anticipation of slightly weaker economic growth of 2.1 per cent in the U.S.

Wholesale trade in Canada fell one per cent in January. It was the second drop in three months. Manufacturing sales also dropped, off 0.9 per cent. The economy sputters along.

The good news

Building permits in the United States jumped 5.1 per cent in February to 717,000. Two-thirds are for single-family homes. The once shattered housing market is back.

Jobless claims in the U.S. fell to 348,000, the lowest level in four years. The jobs recovery could be the real deal, even despite a persistently high unemployment rate.

Canadian retailer Lululemon reported fourth-quarter revenues were up 51 per cent, to $371 million. Yoga pants: not just a fad after all.

U.S. imports shipped in containers, from auto parts to furniture, jumped 4.1 per cent in January from a year earlier. America is in a buying mood again.

Amazon is spending $775 million to buy Kiva Systems, a maker of robots for shipping centres. It won’t cut human jobs. (But when machines take over, we’ll know who to blame.)

Retail sales in Canada rose 0.5 per cent in January. The largest boost was seen among new car dealers, with the healthiest monthly gain in nearly three years.

]]>http://www.macleans.ca/economy/economicanalysis/econowatch-46/feed/3Econowatch: February 2012http://www.macleans.ca/economy/economicanalysis/econowatch-45/
http://www.macleans.ca/economy/economicanalysis/econowatch-45/#commentsThu, 23 Feb 2012 13:50:01 +0000http://www2.macleans.ca/?p=239999A monthly scorecard on the state of the economy in North America and beyond

Over the last month the police in Italy have been setting up roadblocks in the hunt for thousands of criminals. Specifically, tax cheats. They’re easy to spot, it turns out. They tend to be the ones driving luxury cars, like Ferraris and Range Rovers. After performing roadside checks on nearly 3,000 drivers, officials have recovered $90 million, according to one local report. In the fight to balance budgets, it seems, there is still lots of low-hanging fruit.

In North America, the battle for economic stability is no less critical. The economy appears to be on the uptick in the U.S., where employment and job openings are up sharply. But as Federal Reserve chairman Ben Bernanke said last week, real stability will only come when fiscal policy is “placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time.” The Congressional Budget Office reports, however, that the U.S. deficit is not expected to shrink in the next decade, but will instead hit levels not seen since just after the Second World War.

In Canada, there is no longer the luxury of a rosy jobs picture and growth is slowing. But there is a recognition that out-of-control budgets are a major threat. Ontario Premier Dalton McGuinty warned this week of labour troubles ahead as he tries to tackle Canada’s ugliest provincial deficit. The federal government has also signalled that it’s serious about getting its books in order, however unpleasant it might seem in the short run. There are hints of an upcoming austerity budget with cuts worth as much as $8 billion a year.

Officials in most of the Western world are at least on the right track to a healthier long-term economy. Or in the case of Italy, the right road.

The good news

Canada’s trade surplus hit $2.7 billion in December, the highest level since the Great Recession. Exports were up 4.5 per cent. The recovery continues.

The median income in the U.S. is on the rise, reaching $51,400 at the end of 2011, up from $49,400 in August. Reports of the death of the middle class are premature.

New home prices in Canada were up in December, but only modestly at 0.1 per cent, compared to 0.3 per cent in November. When will the good times end?

Canadian Tire’s sales jumped 21 per cent in its latest quarter to $3.1 billion. The rise of the dad consumer.

The economies of the developed world, led by the U.S. and Japan, are on the rise, according to the most recent OECD economic survey.

U.S. jobless claims fell to 358,000—12,000 less than expected. Meanwhile, job openings were at their highest level since September 2008. Is this the turnaround America’s been waiting for?

The bad news

A Royal Bank survey found that just 32 per cent of Canadians feel positive about the economic outlook for the next year, down from 43 per cent a year ago, and 56 per cent two years ago.

Credit card debt levels rose by $19.3 billion in December to $2.5 trillion in the U.S. Those rosy holiday shopping figures come at a price.

Gas prices in the U.S. are at their highest level since last September and are expected to soar this summer in North America. Take that road trip while you still can.

The Texas-based energy giant Halliburton says it will stop giving employees BlackBerry smartphones, and use Apple iPhones instead. Another blow for RIM and its vaunted security claims.

PepsiCo plans to cut three per cent of its workforce, or 8,700 jobs, including 100 in Canada, as it struggles with rising food costs. The taste of a laid-off generation.

Inspections were ordered for Airbus’s A380s due to small cracks in wing components. Minor defects were also found in Boeing’s new 787. Big planes, bigger headaches.

By the numbers

$15 Share price for Las Vegas-based casino operator Caesars Entertainment after its IPO last week. Shares opened the day at just $9.

2020 The year Finance Minister Jim Flaherty said Ottawa’s planned changes to Old Age Security will likely kick in.

$1.5 billion The lawsuit facing Apple over the use of the iPad name in China, where it was registered by another firm.

$90 billion Value of the proposed merger between mining giant Xstrata and Glencore.

‘No measure of justice is enough to make it right for a family who’s had their piece of the American dream wrongly taken from them. But this settlement is a start.’—President Barack Obama on the $26-billion housing settlement reached between federal and state governments and five major mortgage servicers. The majority of the money will go to reduce mortgage debts and refinance loans at lower rates, while $1.5 billion will go to the 750,000 Americans who lost their homes in foreclosures between 2008 and 2011.

Signs of the Times: Towering investments

The U.S. rush to cash in on Canada’s hot retail sector continues as American consumers keep their wallets shut tight. Wal-Mart has decided to spend $750 million to expand and remodel some of its 333 Canadian stores, while also building new ones. The move comes as rival Target prepares to enter Canada next year.

The public will have a chance to own a piece of New York’s 102-storey Empire State Building. Owners of the iconic tower, opened in 1931, are planning an initial public offering that’s expected to raise as much as $1 billion.

In the age of email and Twitter, Canada Post has removed more than 1,000 red letter boxes from street corners across the country. With mail volume down nearly 20 per cent in the past five years, postal workers were finding some of the street boxes completely empty.

It’s not a pretty picture at Eastman Kodak, now in bankruptcy protection. After dumping its film business, the company now plans to stop selling digital cameras (which it invented), pocket video cameras and digital picture frames to save money.

]]>http://www.macleans.ca/economy/economicanalysis/econowatch-45/feed/1Econowatch: January 2012http://www.macleans.ca/economy/economicanalysis/econowatch-44/
http://www.macleans.ca/economy/economicanalysis/econowatch-44/#commentsFri, 20 Jan 2012 12:40:01 +0000http://www2.macleans.ca/2012/01/26/econowatch-44/A monthly scorecard on the state of the economy in North America and beyond

Canada’s big banks offered homebuyers a big fat incentive last week when, led by the Bank of Montreal, most dropped their five-year fixed mortgage rates to an unheard of 2.99 per cent. Like the failing Detroit auto industry of the early 2000s, with its zero per cent financing, no-money-down offers, Canada’s banks appear willing to sacrifice some profit to keep the mortgage market booming. They’re still making money—and certainly won’t go bankrupt like two of the Big Three automakers did—but there is a similar whiff of desperation here at a time when the housing market appears to be cooling. Even in once hot markets like Calgary, prices have flattened.

These ultra low rates are bad news for Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney, who’ve been warning Canadians for years to stop taking on record debt loads in this era of easy money. BMO’s rate does come with a few catches, like a maximum 25-year payment period. But that doesn’t mean buyers won’t find themselves in trouble five years from now if rates rise.

Maybe the bigger concern is what happens if the housing market really does head south, and what that means for the Canadian economy. Over the past decade, construction was the second-fastest growing industry, creating one million jobs. It now accounts for an incredible one-tenth of Canada’s GDP. Rising house prices have also made Canadians feel richer and insulated from economic troubles. As the U.S. showed, when housing is stripped from the equation, things can quickly go from bad to worse. Record-low mortgage rates might help keep the economy chugging along, but let’s just hope we’re not now running on fumes.

Brought back down to Earth

After watching their parents get burned, 52 per cent of young people say they will never be comfortable investing in the stock market (29 per cent of all ages say the same thing), according to a survey by MFS Investment Management. So much for the recovery.

Gander, Nfld., once famous as a European stopover until the advent of long-range jets, has briefly reprised its old role thanks to extraordinarily strong headwinds over the Atlantic. The unexpected visits are good for the local economy, too, bringing in tens of thousands in additional landing fees.

Apple is used to being loved by consumers. But one of its Beijing stores was instead pelted with raw eggs after a botched iPhone 4S launch in China. Customers who waited overnight in frigid temperatures were furious when the store didn’t open.

Taco Bell has decided to go upscale to better compete with the Chipotle restaurants of the world. The chain, which built its business on dirt-cheap tacos and talking dog commercials, plans to offer such ingredients as black beans, cilantro rice and corn salsa.

By The Numbers

66 per cent Americans who believe there is a “serious conflict” between rich and poor, according to a recent Pew Research Center survey

710 ml The size of the new Tim Hortons “extra large” cup—roughly the equivalent of four average-size coffees

20,000 The number of new technology products on display last week at the annual Consumer Electronics Show in Las Vegas

24 million Customer accounts hacked in a cyberattack at Zappos, a U.S. retailer owned by Amazon.com

$413 million The price of Lions Gate Entertainment’s acquisition of Summit Entertainment (maker of the Twilight film series)

$100 billion The estimated value of Facebook based on its much-anticipated initial public offering, expected this spring

Good News

Canadian exports will grow this year by six per cent, boosted by a strengthening U.S. economy, according to Export Development Canada. Thanks Uncle Sam.

Saskatoon will lead the country in growth this year, with its economy expanding four per cent, says a Conference Board forecast. A Prairie uprising.

Consumer sentiment in the U.S. rose to an eight-month high in early January. Happy New Year.

Tourism spending in Canada rose 0.8 per cent in the last quarter—the ninth consecutive gain. It was largely due to Canadians travelling at home. Long live the staycation.

Luxury automaker Rolls-Royce sold the most cars in its more than 100-year history in 2011, with sales up 31 per cent from the year before. The one per cent strike again.

Business trips in the U.S. rose 2.1 per cent last year and business-travel spending jumped 7.6 per cent, according to a trade group report. It’s the return of the salesman.

Bad News

Standard & Poor’s downgraded the debt rating of nine European countries, including France, the eurozone’s second-biggest economy. The continent inches closer to recession.

China, the world’s second-biggest economy, experienced its slowest growth in 10 quarters at the end of 2011, raising concerns about a wider global slowdown.

Average home prices in Canada rose just 0.9 per cent in December compared to a year earlier—the smallest increase since October 2010.

Orange juice futures hit an all-time high this week as some imports to the U.S. were halted on fears of a fungicide. Your breakfast could soon get a lot more expensive.

Sweet snack-maker Hostess Brands filed for bankruptcy—its second restructuring effort in three years. The Twinkie may be indestructible, but the company behind it sure isn’t.

The value of building permits in Canada fell 3.6 per cent in November. Not as bad as economists had expected, but still a potential dark cloud looming over the economy.

]]>http://www.macleans.ca/economy/economicanalysis/econowatch-44/feed/2In conversation: James Altucherhttp://www.macleans.ca/general/on-making-money-losing-it-all-and-climbing-back-from-the-abyss/
http://www.macleans.ca/general/on-making-money-losing-it-all-and-climbing-back-from-the-abyss/#respondTue, 20 Dec 2011 15:50:01 +0000http://www2.macleans.ca/2011/12/22/on-making-money-losing-it-all-and-climbing-back-from-the-abyss/On making money, losing it all, and climbing back from the abyss

]]>James Altucher is the managing partner of Formula Capital, and the author of several finance and motivational books based on his wild career—he has made millions, lost it all and recovered it again, suffering an emotional breakdown along the way. His website Altucher Confidential has been viewed 10 million times since its launch last year. And his latest self-published book, I Was Blind But Now I See, is among the top-ranked motivational books on Amazon’s Kindle store. Altucher, who created StockPickr.com, was also a columnist for London’s Financial Times.

Q:Your self-help books focus on your own losses and failures and how you overcame them. What has struck a nerve with people?

A: I think everybody is ashamed. Of what? That in 2009 the tide came in and they either lost their job, their marriage or they had trouble paying their mortgage, or at any time in the past 15 years they didn’t make as much money as their friends. I think my book gives permission that that’s okay. We’ve all been through it.

Q:Are most of your readers Wall Street types?

A: No. It started that way. A little over a year ago, it was all Wall Street people, but now it’s [people from] all over.

Q:You write some very vivid descriptions about fear—what you call your “year of stress” after losing everything in the dot-com crash—pacing your house at 3 a.m., worried about your house, even contemplating suicide. Was there one point where you realized your life needed to change?

A: Several times I reached that point. When you’re in the middle of losing everything but you don’t want to, you have kids to support, you have to make a change. You have to clean up. When I forget that, I fall apart again. It’s a roller coaster.

Q:You call yourself Dr. Failure. How many businesses have you failed at?

A: I’ve had hundreds of ideas. I’ve probably failed at a good 17 different business attempts and I’ve had three successes.

Q: You focus on creativity in your advice to getting back on track. Does everyone have the talent to be creative?

A: Yes. It’s not a talent. It’s a learned ability. The idea muscle, like any other muscle, atrophies in weeks of non-use. You start every day with 10 ideas: people I should talk to, businesses I should start, books I should write. It has to be a solid, doable next step. You’ll come up with nothing but bad ideas for the first month. Between one and three months you’ll start coming up with good ideas. After six months, honestly, life should be completely different. It’s not that your ideas are so good. It’s the sheer quantity and the honing of the muscle so you start to know more and more what ones are actionable and good.

Q: You’re also a big critic of the belief that people should own a home and go to college. You’ve done both, and made a lot of money having done that.

A: I’ve done well, but I don’t want to connect the two. I think I would have done well if [I hadn’t gone to college]. If you took 2,000 equally ambitious and aggressive people and gave half of them a four- or five-year head start with no debt at the end, they’re probably going to do very well. Just like they’ve done very well throughout history. It’s only in the past 30 or 40 years that a college degree has become kind of mandatory in American society.

Q:Would you have gotten an interview for your first job at HBO (working in the IT department) without a college degree?

A: That’s a hard question. Would I have gotten a job at Goldman Sachs without a college degree? No. You need an Ivy league degree and probably 1,600 on your SATs. For certain things, you will be disqualified. Now, I didn’t get the job at HBO because of my college degree. Funnily enough, I probably would have been rejected for that job. There was an incident where my boss’s, boss’s boss at HBO was a ranked chess player, but ranked lower than me. That helped me get the job.

Q: You write that he saw you playing chess in a New York City park after the interview.

A: Throughout the entire interview process, I didn’t know anything at all. Then he saw me playing and we took a walk around the park and a day or two later I got the job offer from him.

Q:After HBO, you started a company designing websites. You mention an early client was the Wu-Tang Clan. Who else did you work with?

A: Loud Records was a client, and the Wu-Tang Clan was one of their artists. I was also dealing with, funnily enough, every gangster rap record label.

Q: You eventually sold the company.

A: Yes, in September 1998. I did very well. I sold at the right moment. I cashed out at the right moment. And then suddenly I went stupid. I did everything you could possibly do wrong for the next year and half.

Q: What was that?

A: I figured, I’m the smartest guy in the world because I made all this money—which is the first mistake people who make money think. I said, I made all this money on the Internet, so the Internet is this great thing. I decided, in March 2000, I’m going to buy every Internet stock I can and keep doubling down as I go down. That didn’t work. I lost $1 million a week in the summer of 2000 and went to zero.

Q:You write about watching your bank account go from $15 million to zero in two years, which sounds terrifying.

A: Yes it was. Even now, it’s sad. A few years later my dad got sick and I could have maybe helped him more if I’d had that money. But I was like a foolish, drunken rock star; I was like Courtney Love on steroids . . . I don’t want to put her down. She might be better with her money than I am.

Q:How did you come out of that funk?

A: I had to figure out how to support my family. So I got healthy again instead of just lying on the floor. Emotionally, I got rid of anybody who was negative. And I started writing down ideas. After writing hundreds, some of them started to work. I built an entirely new career, from scratch. Ironically enough, it was in investing.

Q:You talk about your “daily practice” to becoming healthier, which includes some pretty basic things: fly a kite, sit on a swing.

A: Yeah, when I first sold my apartment after going broke and I was kind of in exile, I needed ways to cheer myself up. I was really depressed, so things like that, where you step out of your normal rhythm, do cheer you up.

Q: I have to ask you about one of your ideas—to become a psychic on Craigslist.

A: Right around the time I had separated from my first wife, I don’t know, I was feeling lonely and I was feeling totally down and out, and I just wanted to connect with people, so I put an ad on Craigslist that said: “I’m psychic. Ask me any question you want, and I’ll answer.” And in all my answers I was fair, I gave just my opinion. I viewed it more like Craigslist therapy than Craigslist psychic powers. It was fun, and I have Facebook friends now that I met that way.

Q: Do you describe yourself as happy now?

A: Yes, I do. It doesn’t mean I have $100 million, or a yacht on the Mediterranean. I ascribe happiness more as a feeling of contentment.

Q: Where does money fit into the equation?

A: Money’s extremely important, to support yourself and to support your family and to be as comfortable as possible, so somewhere in between, you know, being a billionaire and being somebody who sits in a cave all day by yourself, there’s the right amount of money that produces contentment.

Q:There’s an interesting headline in the book: “You need to quit your job right now,” which is a message that probably a lot of people would find appealing but I’d venture not many people will follow.

A: Well, you know, let’s look at that question broadly. So why does somebody want a corporate job? Because they think it means safety. A corporate job is not safe. It’s much safer to develop ideas and to have multiple streams of income, just like I was able to do where I was not only investing other people’s money but I was writing about it and I was also doing deals and transactions.

Q:You’re a big proponent of the American economy. What’s your forecast for the next few years?

A: There’s going to be an enormous boom, and the reason is there’s a lot of cash lying around looking for something to do. The banks have almost $3 trillion, the non-banks have another $2 trillion, pension funds have another trillion or so in savings. There’s $5 trillion in this economy that’s all potential customers and investors, so I think this money’s eventually going to filter through and benefit all of us.

]]>http://www.macleans.ca/general/on-making-money-losing-it-all-and-climbing-back-from-the-abyss/feed/0Econowatch: December 2011http://www.macleans.ca/economy/economicanalysis/econowatch-43/
http://www.macleans.ca/economy/economicanalysis/econowatch-43/#commentsWed, 07 Dec 2011 17:10:01 +0000http://www2.macleans.ca/2011/12/08/econowatch-43/A monthly scorecard on the state of the economy in North America and beyond

Feeling down about the state of the economy? You’re not alone. According to a recent global survey, nearly a quarter of the workforce, weighed down by economic uncertainty, is depressed. In Canada, a poll found that 89 per cent of workers feel overworked, up from 64 per cent two years ago. There is not a lot of positive energy going around.

Unfortunately, this could become a chronic condition, because there’s little to suggest that the economy will spring to life any time soon. Nowadays, just as things start to look up, they drop back down. U.S. third-quarter growth was recently revised downward, from 2.5 per cent to two per cent. Markets are swinging almost daily by amounts they once moved only over a period of months.

Many observers are coming to the conclusion that this go-nowhere drift is the new normal. We could be headed for a long era of disappointment, like the one the U.S. economy fell into in the ’70s, when markets were all but dead and growth stalled. Even politicians are throwing up their arms. “Our world has entered into a time of slower growth,” warned the Ontario Liberals in their recent Throne Speech, “and we expect that slower pace of growth to continue throughout the four-year mandate given to this parliament.” A stirring message: four more years of hard times.

That may come as a surprise to Canadians, who have been told that our economy is better than most. But we can’t escape the shadow of Europe’s debt crisis and America’s trillion-dollar deficit troubles—a combination of events that, as BMO chief economist Sherry Cooper recently noted, “has spiked the level of financial and economic uncertainty.” A pretty bleak picture, enough to make a person feel depressed.

‘The only adverse event the Fed left out is a direct asteroid strike on a major banking centre’

—Karen Petrou, managing partner, Federal Financial Analytics

Her take on the thoroughness of the stress tests Federal Reserve chairman Ben Bernanke asked the 31 largest U.S. banks to perform on their loan portfolios. The tests are meant to ensure the institutions have enough capital to withstand losses in the event of a deep recession—even one that includes an eight per cent drop in GDP and a 52 per cent plunge in the stock market.

By the numbers

A new study in the Journal of Consumer Research suggests people who pay with credit cards not only spend more, but actually experience a euphoria resembling lust. It also causes people to ignore the potential downsides of a product, the study said.

High commodity prices have prompted a Dutch company to sift through the ashes of cremated people in search of the precious recyclable metals contained in prosthetic limbs, metal joints and implants. The non-profit firm gives most of the money back to funeral homes so it can be donated to charity.

European travellers who have already booked holiday vacations with Thomas Cook could be out of luck. The British tour operator is poised to become a casualty of the deepening financial crisis as people increasingly stay home and worry about their jobs.

SaskPower plans to give away 50,000 block heater timers to customers who will plug in their cars this winter. Leaving cars plugged in for more than four hours is unnecessary and wastes electricity, the utility says.

Signs of the times:

75 storeys

Height of the latest proposed residential tower planned for Toronto, the city leading Canada’s booming condo market.

$236,000

How much more money “attractive” people earn in their lifetime than their plain counterparts, according to a University of Texas professor.

90 million

Number of Americans expected to be using a tablet computer by 2014, up from 33 million today.

3.5 billion

Number of YouTube videos watched daily, up 500 million from just six months ago.

$1.7 trillion

Value of Canada’s fixed assets in 2011, including non-residential buildings, machinery and equipment.

]]>http://www.macleans.ca/economy/economicanalysis/econowatch-43/feed/1Down with bosseshttp://www.macleans.ca/economy/business/down-with-bosses/
http://www.macleans.ca/economy/business/down-with-bosses/#respondTue, 29 Nov 2011 14:10:01 +0000http://www2.macleans.ca/2011/12/01/down-with-bosses/Managers can take up to 33 per cent of payroll. Are they worth it?

Imagine an office with no managers. Workers have no doubt fantasized about it once or twice in the confines of their cubicles, but it’s an idea that could actually have some useful benefits for organizations, argues Gary Hamel, a professor at the London Business School and business strategy expert. Managers are expensive, for starters. A company with 100,000 employees might have 10,000 managers, plus another 1,111 managers to manage the managers, he writes in the Harvard Business Review. All told, they could account for 33 per cent of the payroll. Big management hierarchies also up the odds of “calamitous decisions”—the bigger the decision, the smaller the number of people who can challenge decision-makers—and slow down the decision-making process. They also limit the incentive for lower-level workers to contribute ideas. Of course, in the real world, managers do offer a necessary guiding hand. Even if, as Hamel concludes, it can be “inefficient and often ham-fisted.”

The day after Thanksgiving is a quasi-religious shopping experience in the United States. It kicks off the all-important holiday shopping season with a day of frenzied buying amounting to over $10 billion in sales. This year, many big box retailers plan to open a little earlier than the normal 4 a.m.—some on Thursday, Nov. 24, Thanksgiving Day itself. Target, Macy’s and Best Buy will all open at midnight on Thanksgiving, reports the New York Times. Wal-Mart, the hours-expanding trailblazer of the bunch, will open at 10 p.m. Thursday. Critics say this is yet another sign of the evils of consumerism. Employees will have to work on the biggest holiday of the year, while shoppers will have to head to the mall before the turkey is even carved, if they hope to beat the lineups. But with recent data showing worrying signs that retail sales are slowing leading into the holiday season, retailers appear to be wisely searching for any kind of advantage—even if it’s only an extra hour or two with the tills open.

]]>http://www.macleans.ca/economy/business/black-friday-creep/feed/1Foxconn’s robot empirehttp://www.macleans.ca/economy/business/foxconns-robot-empire/
http://www.macleans.ca/economy/business/foxconns-robot-empire/#commentsMon, 14 Nov 2011 14:10:01 +0000http://www2.macleans.ca/2011/11/17/foxconn%e2%80%99s-robot-empire/Last week, Foxconn launched a $224-million project to build one million robots in the coming three years

For all the love heaped on Apple’s artful products, critics have long pointed to a dark side—the working conditions at factories where iPhones and iPads are made. Foxconn, the Taiwanese electronics manufacturer that churns out the gadgets, has struggled in recent years with over a dozen worker suicides in China. In response, it has boosted wages and even put up netting to stop employees from jumping from rooftops.

Its latest bid to solve labour woes goes a step further. Last week, Foxconn launched a $224-million project to build one million robots in the coming three years to use in its factories. The output, which has been described in Taiwan as “an empire of robots,” will double the number of industrial robots in the world and replace 500,000 Foxconn workers. The company has said the efforts will move employees “higher up the value chain.” No doubt it will also ease rising labour costs and shortages.

]]>http://www.macleans.ca/economy/business/foxconns-robot-empire/feed/3Econowatch: October 2011http://www.macleans.ca/economy/economicanalysis/econowatch-41/
http://www.macleans.ca/economy/economicanalysis/econowatch-41/#commentsTue, 11 Oct 2011 15:00:01 +0000http://www2.macleans.ca/2011/10/13/econowatch-41/A monthly scorecard on the state of the economy in North America and beyond

The TSX is down 20 per cent from its April high. It’s official, the bear market is back. The financial news is so bleak that even viral videos, which normally feature cute animals and footballs hitting groins, seem to have lost their sense of humour. Last week, one of the most talked-about Web videos was of a stock trader telling a BBC interviewer how the economic crisis is a cancer. “If you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late,” said Alessio Rastani, who argued that “the stock market is finished” and that people should hedge against an inevitable crash, like hedge funds are now doing.

Bloggers and business publications were quick to question Rastani’s bona fides. He’s self-employed, has modest holdings and is, in short, just an average guy. Which maybe explains why his message touched a nerve among average investors trying to make sense of the market chaos as their savings evaporate.

More importantly, it speaks to the extent that the economic crisis is one of confidence. Consumer confidence surveys show optimism has gone AWOL, even despite recent data showing there are silver linings. In the past months, companies have continued to go about their business—factories are humming in Canada and the service sector is growing. In the U.S., economists are predicting GDP will grow in the third quarter. Troubles still loom large. Employment is stalled and the eurozone is teetering. But tune out the markets for a moment, watch the likes of Rastani with all the seriousness you would a kitten slipping off a windowsill, and things aren’t so bad. Or at least, they could still be a lot worse.

By The Numbers

60 years | The prison sentence given to U.S. hedge fund manager Adley Abdulwahab, who ran a $100-million fraud scheme.

$199 | The price of Amazon’s much-anticipated new tablet computer, the Kindle Fire.

$43.5 million | Supercar-maker Spyker’s sale price. It was bought by an American private equity firm.

$563 million | The final renovation bill for B.C. Place Stadium, which now has a new retractable roof.

$800 million | Multimedia blogging site Tumblr’s value, after raising $85 million in funding.

$5 billion | What climate change will cost Canada each year by 2020, according to a new report.

So you lost your job

Hallmark has discovered a new market for its cards: the roughly eight million Americans who have lost a job since 2008. Some of the cards strike a sympathetic tone, while others are more humorous, like the one featuring a cat that asks: “Is there anywhere I could hack up a hairball, like say, on a former employer’s head?”

The Swiss watchmaker TAG Heuer plans to open a new sales website in the U.S. next year. It also plans to open 22 boutiques and as many as 300 outlets in cities and in airports (for those really last-minute luxury gifts) over the next five years.

An art installation called Power Toilet offers customers at a New York diner a view of an exact replica of the executive washroom at JPMorgan Chase’s headquarters. “It’s about making private spaces public. And it’s about the excesses of Wall Street,” an organizer told the New York Times, describing the $10,000 project.

The decline of the PC continues. IBM passed Microsoft to become the second-largest technology company, after Apple. The market value of IBM, which now focuses on corporate software, hit US$214 billion, compared to Microsoft’s US$213 billion.

Before becoming one of the star investors on CBC’s Dragons’ Den and ABC’s Shark Tank, Kevin O’Leary founded the software firm SoftKey, which later became The Learning Company and merged with Mattel in a deal worth nearly $4 billion. He now heads the investment firm O’Leary Funds and also co-hosts CBC’s The Lang & O’Leary Exchange. His new memoir Cold Hard Truth hit shelves last week.

Q:You offer a lot of lessons in your book about how to succeed in business. Can entrepreneurialism be taught?

A: I actually think being an entrepreneur is a state of mind. If you’re going to be an entrepreneur, my thesis is that you have to sacrifice everything for some period in your life to be successful. You have to be myopic and completely focused and unbalanced in every way. Once you achieve success, you’re free to do whatever you like.

Q: You write about being steered into business by your stepfather and mother.

A: Well, my mom’s attitude was, you’re going to find your own path, and life is serendipitous. She wasn’t as rigorous and hardcore as my dad, who looked at me one day and said, “You’re going to amount to nothing. All you do is party and you want to be a photographer. That’s the most competitive industry on Earth. You’re not that good.” The guy was giving me the truth: you should go back to school and at least get some tools.

Q:There are professional photographers. You could have pursued that.

A: I wanted to do that. I wanted to go to Ryerson. His thesis was: what’s your competitive advantage? What’s your difference? I’ve met with and worked with many photographers now, and I realize that it’s a brutally competitive market and they are really, really good. I honestly don’t think that I have that.

Q: This was your stepdad. Your biological father you describe as being a real salesman. Do you think you inherited that from him?

A: I do. I noticed the other day in a photo of him with his arms stretched in a position I do a lot; it looks just like I do. He died when I was seven. But I remember him. He was a classic Irish partier. A very kind man but also a real renegade.

Q: He lived hard?

A: Very hard. It’s what those Irish guys did. My mother divorced him right before he died and I think he died with a broken heart.

Q:What do you think he would have made of Dragons’ Den?

A: He would have been proud of me. He really missed a lot of life. I think he drank himself to death. It’s something I’m very cognizant of.

I was driving a couple of years ago and Peter Munk, the chairman of Barrick Gold, calls me and says, “Did you know that I came over on a boat with your father from Ireland? He was my roommate.”

Q:Get out of here.

A: No I’m serious. He said, “I just wanted to call you and let you know that he was a great guy.” It was a remarkable moment.

Q:What about your mother? Did she have a chance to see any early episodes of you on television?

A: She did and she was always fascinated by television. She actually enjoyed Lang & O’Leary more than anything. She really respected Amanda.

Q:Your mom factors heavily in your book . . .

A: She was an amazing woman and went through a lot of hardship, but also gave me tremendous guidance and support. She had an investment philosophy that I didn’t appreciate then but I do now. She said, never invest in anything that doesn’t have yield. When she died three years ago, I was executor of her estate and I realized she had every single dime she’d ever made.

Q:That’s still your investment philosophy today.

A: And it works! It really works.

Q:She was a working mom too, right?

A: A working mom. Her father owned [a clothing factory] but his philosophy was that the daughters all had to work on the sewing line. She was the boss’s daughter but not treated differently than anybody else. That’s how I treat my kids, too. When I fly over to see my dad in Geneva, my son has to sit in the back of the bus because I say to him, you have no money. You can’t afford to sit in first class. It’s a good lesson. He gets it. It makes him mad.

Q:Your mom later became the CEO of the family company.

A: It was tough. I had a German nanny. My dad was gone. I had dyslexia.

Q: You write in your book, “Money is the lifeblood of family.” Explain that.

A: Unfortunately it’s the truth. You can say family can be held together by love, but the truth is if there’s no capital there you get into a very bad place. Money puts tremendous pressures on relationships if you don’t have any.

Q:But your parents would have loved you if they were broke and living in a shack, right?

A: Yeah, but you know . . . money tears families apart for lack of, and for too much. It’s a very powerful force and you have to understand it and respect it.

Q:People would probably be surprised to hear about your whirlwind childhood—living in Cambodia, where your stepdad worked for the UN, going to military college in Quebec. Was that hard?

A: It was hard. I think back and think I missed something. But at the same time it gave me an appreciation of the world. I own real estate in Cambodia because I know it’s a great place for real estate. No one else knows—but I lived there for two years and I’ve been back.

Q:What did you learn at military college?

A: The discipline of getting up at 4:30 in the morning.

Q:Do you still do that?

A: I do. I get up between 4:30 and 6:30 every day.

Q: Were you a popular kid?

A: I had good friends. What’s happened to me over time is my best friends are the ones I’ve been to war with in business. I make friends inside a company and I stay friends with them the rest of my life.

Q:In one of your early endeavours you worked in TV production, including on Don Cherry’s Grapevine, a half-hour interview show. What was that like?

A: I owned that format. I owned Special Event Television with two partners. The first time I made money was selling Don Cherry’s Grapevine to his son.

Q:Do you channel Don Cherry when you’re on TV now?

A: I really respect Don. When you go on television it’s because you’re trying to create something people watch. He’s very flamboyant, entertaining and I think he taught me a lot about that.

Q: On TV you have a reputation as being the mean guy. You have a story about one man who came up to you in an airport washroom after seeing you on Dragons’ Den and called you an asshole. You’ve said this kind of stuff doesn’t bother you.

A: It doesn’t bother me at all.

Q: It’s hard to believe. Everybody wants to be liked.

A: Here’s why I know I’m right about this. The reason he said that is that I’m simply telling the truth. The one thing about money is you have to tell the truth about it. It’s the only metric in life where there’s no grey. You either make money or you lose money.

A: Because we’ve gone through this journey together; we’ve explored an idea and we’ve come to the right conclusion: it’s stupid. That’s a good outcome. I’m not trying to make friends, I’m trying to make money. My whole theme is just tell the truth.

Q:Let’s talk about The Learning Company, which you sold to Mattel in what turned out to be an epically bad merger.

A: You know, what’s interesting is the company is back [under new ownership] with all the same brands and doing very well. I think Mattel squandered a fantastic asset. One of the big motivations in writing this book was to set right what actually happened after they acquired the company. In my mind I’ve cleared the record.

Q:Obviously you’ve heard all the criticism: that TLC wasn’t profitable, that Mattel was somehow deceived.

A: Of course, if any of that were true it would have come out in the litigation. None of it was. They had forensic accountants tear our books apart for two years.

Q:You talk about how a culture clash between your software firm and a big bureaucratic toy maker ruined what could have been a good deal. The failure must have really bothered you.

A: It made me crazy. I was out of my mind unhappy.

Q:You and the CEO of Mattel, Jill Barad, both lost your jobs.

A: Well, I mean, I wasn’t happy being an employee anyway. I had a three-year non-compete. It was the most miserable time of my life. I was making the largest salary I had ever made and I wasn’t allowed to work.

Q:You once managed to get a meeting with Steve Jobs, where you asked him to pay TLC to keep carrying Mac-compatible software. What was he like?

A: He was so abusive! Toughest guy I ever met. We were in the boardroom at Apple and he went into a diatribe like I had never heard before. But we eventually did a lot of business with Apple. He’s a tough guy. Maybe that’s why it works. And hey, there’s an asshole!

]]>http://www.macleans.ca/general/on-his-unconventional-childhood-what-steve-jobs-is-really-like-and-what-don-cherry-taught-him/feed/9Econowatch: early September 2011http://www.macleans.ca/economy/economicanalysis/econowatch-40/
http://www.macleans.ca/economy/economicanalysis/econowatch-40/#respondMon, 12 Sep 2011 15:30:54 +0000http://www2.macleans.ca/?p=214184The relative calm of markets during the first week of September brought a welcome end to a thoroughly rotten August. For several days, investors rediscovered their inner bulls, largely on…

]]>The relative calm of markets during the first week of September brought a welcome end to a thoroughly rotten August. For several days, investors rediscovered their inner bulls, largely on reports that U.S. Federal Reserve officials are warming to the idea of buying even more government bonds to try to stimulate the economy.

But there is a wide gap between the sense of optimism that was on display and what’s happening on the ground. Unemployment remains high, with no sign of healthy job creation on the horizon in the U.S. There is still no lifeline in sight for those whose mortgages are underwater (and who couldn’t refinance even if rates keep dropping). The body of evidence suggests that the economy is teetering on the edge of another downturn. In Canada, it has already slipped into reverse as exports fell—a warning sign of what’s happening beyond our borders.

So what might a new round of so-called quantitative easing do to tip the balance in the direction of growth? If the last round, dubbed QE2, is anything to go by, probably not a heck of a lot. Launched in 2010, it sought to add $600 billion into the U.S. economy (on top of the $1.7 trillion added during QE1 to halt the 2008 financial crisis). For awhile, markets soared thanks to all the cheap money available. There were also hopes that the benefits would spill over and translate into lower interest rates, more lending and eventually more spending by businesses and home buyers.

That didn’t happen. The confidence boost from rising stock prices wasn’t enough to overcome America’s bigger economic problems: unemployment and slow growth. QE2 has also been blamed for driving up commodity prices, pushing up the cost of fuel and food. And there’s no reason to think it’ll be any different this time.

CP/iStock/Getty Images

Signs of the times:

An Italian town has come up with a bold plan to avoid Rome’s deep austerity measures: secession. The mayor of Filettino (pop. 1,000) wants to create a sovereign principality and has already printed up a new currency—adorned with his photo, of course.

Mere weeks after downgrading U.S. debt to AA for the first time in history, Standard & Poor’s continues to hand out superior AAA ratings to mortgage-backed securities containing subprime loans—the very same financial instruments blamed for spawning the 2008 financial crisis.

It’s not just bottled water and batteries that fly off store shelves during hurricane season. Strawberry Pop Tarts are another emergency staple, according to an economist who studied Wal-Mart’s extensive preparations for storms.

As the EU grapples with a deepening financial crisis and fears of a second U.S. recession grow, luxury Parisian fashion house Hermès has a different problem: meeting soaring demand for expensive handbags and silk scarves. Yet another piece of evidence that we may not all be in this together.

]]>http://www.macleans.ca/economy/economicanalysis/econowatch-40/feed/0Big Mac-onomicshttp://www.macleans.ca/economy/business/192712/
http://www.macleans.ca/economy/business/192712/#respondWed, 25 May 2011 13:10:38 +0000http://www2.macleans.ca/?p=192712McDonald’s in Europe might be used to help gauge the level of innovation in certain areas.

Economists have long looked to global restaurant behemoth McDonald’s as a useful tool to mine data. The Big Mac index, for instance, was invented to measure whether world currencies are over- or undervalued. A new study suggests that McDonald’s in Europe might also be used to help gauge the entrepreneurial level of certain areas.

McDonald’s has a varied customer base, hires immigrants and, at least in Europe, is seen as a symbol of “cosmopolitanism and a modern urban lifestyle,” note economists at the University of Amsterdam. So a large number of McDonald’s in a region “may be used as a proxy for the openness and international connectedness of the region.” Researchers used that location data to help prove there is a link between innovation (measured by the number of patents filed) and areas with diverse groups of immigrants from regions with high skill levels. In other words, if you want to set up shop in an idea-rich part of Europe, McDonald’s may have already identified the best locations.